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Retail sector research points to moderating vacancies and rent weakening

A retail sector research by Savills released on 17 August, suggests that vacancies are moderating while rents are weakening. The research by the prominent real estate services company noted that despite the festive spending prior to Hari Raya Aidilfitri, which lifted retail sales (excluding motor vehicles) in May, the overall sales growth for both April and May was restrained by sluggish sales of discretionary goods.

The island-wide vacancy level for the retail sector was down by 0.2 of a percentage point (ppt) quarter-on-quarter (QoQ) to 7.3% in Q2/2018, marking the lowest quarter since 2016, said the report.

It further noted that the retail rental index in the central region slipped 1.1% QoQ in Q2/2018, reversing the slight recovery of 0.1% in the preceding quarter. Savills prime monthly rents in Orchard Road and the suburban area stayed fl at at S$29.90 and S$28.80 per sq ft respectively in Q2/2018.

The research on the local retail sector suggested that although the retail industry remains very challenged, rents may be trying to find a base at current levels.

For the past few years, household income and tourism expenditure have been rising consistently and it seems counter intuitive that the retail sales index should remain subdued for so long. It asked if the new electronic payment means were causing the under-reading.

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In its outlook for the prospects of the retail sector market, the Research said:

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