DTZ, the property consultancy, anticipates a slight dip in retail rents for the remaining months in 2009 as well as in 2010.
“Although investment activity has risen, retail spending remains weak and depends on the extent of economic recovery,” said Chua Chor Hoon, the head of South-east Asia research firm.
As Singapore economy is struggling to recover, more retail spaces have been coming on stream in the country. About 486,000 sq ft of space, primarily in City Square Mall, Kitchener Road, had been completed in Q3 of 2009. In the fourth quarter of 2009, over 500,000 sq ft will be offered.
According to DTZ, the total retail space that has been completed for the year is a historic high of 2.6 million square feet.
However, the condition is not totally depressing. ”Although retailers remain cautious about expansion, leasing activity is selectively active,” explained Anna Lee, the associate director of retail in DTZ. “F&B retailers have been more active in leasing enquiries, as consumers are more willing to spend on food than on fashion apparel.”
In the first two months of the third quarter, DTZ saw that the total sale of shop transactions had surpassed the number gained in the second quarter. DTZ claimed that the figure was close to the second quarter of 2008, before the nation suffered from the financial turmoil.
In the third quarter, the prime first-storey rents in Scotts Road and Orchard Road marginally dropped as the new malls had drawn both existing and new brands, increasing the take-up rates.
From the second quarter’s $39.50 per square foot per month (psf pm), the retail rents mellowed down by 0.5 percent to $39.30 psf pm over the quarter.
For two consecutive quarters, capital values within the area have stayed consistent.
In suburban areas, prime first-storey rents were stable in the third quarter at $33 psf pm, similar with that in the last quarter. Likewise, capital values in the areas had also risen by one to three percent.
DTZ claimed that there are still queue of enthusiastic tenants and healthy levels of occupancy have continued to benefit suburban malls. Some of the retailers have transferred to smaller residential catchments.