SINGAPORE - Average prime first-storey retail rents fell islandwide by 3.7 per cent quarter-on-quarter and 4.5 per cent year-on-year to about $30.90 per square foot in the third quarter of this year, DTZ Southeast Asia said on Wednesday (Sept 30).
The average monthly rent recorded in the July-September quarter is the lowest since the first quarter of 2006, said the real estate services firm.
It attributed the fall in rents largely to weaker consumer sentiment and slower retail sales.
DTZ said rents in the other city areas outside Orchard Road, which include Marina Centre, City Hall and the Central Business District, declined the most - by 4.5 per cent q-o-q to about $22.10 psf in the third quarter. On the other hand, average prime first-storey rents in Orchard/Scotts Road slipped by a smaller percentage of 3.5 per cent q-o-q to $38.45 psf. DTZ said rents there were more resilient as the area remained highly sought after by many international brands.
Prime first-storey monthly rents in the suburban areas fell by 3.5 per cent q-o-q to $32.10 per sq ft in Q3.
Based on the latest URA statistics as of Q2 2015, islandwide occupancy rate for retail space fell marginally by 0.4 percentage point to 91.8 per cent. In Q2, occupancy rate in the Orchard/ Scotts Road dipped by 0.7 percentage point q-o-q to 92.0 per cent. Over the same period, occupancy rate in the other city areas and suburban areas declined marginally by 0.4 and 0.2 percentage point q-o-q to 90.0 per cent and 93.0 per cent, respectively.
There will be no new completions in Orchard/ Scotts Road in Q4 2015. In the other city areas, an estimated 74,000 sq ft of retail space is expected to come onboard by end-2015, with the retail component at South Beach contributing 53,000 sq ft.
Most of the upcoming supply in 2015 will be in the suburban areas, which will see some 836,000 sq ft of new retail space coming into the market. Anticipated completions in the area include Waterway Point (371,000 sq ft) and the asset enhancement initiatives (AEI) of Technopark@Chai Chee (230,000 sq ft), which are slated to complete by year-end.
Said Dr Lee Nai Jia, DTZ's associate director of research, noted: "From 2015 to 2019, more than four million sq ft of retail space in the suburban areas will be released. With more retail options for consumers, malls in the suburban areas are expected to face greater competition."
"Consequently, older suburban malls in particular, will be inclined to reinvent and enhance their shopping experience in order to sustain rental values."
Tiong Bahru Plaza for instance, is currently undergoing a $90 million revamp to attract residents in the vicinity as well as a younger crowd. Scheduled to complete by 2016, the newly renovated mall will include a new playground and open terraces for events such as flea markets and music performances.
Said Ms Anna Lee, DTZ's director of retail: "Rejuvenation of tenant mix and AEIs are no longer sure-win solutions to ensuring sustainable foot traffic. Rather, these initiatives have become part and parcel of a natural cycle that malls have to go through to keep abreast of ever-changing consumer trends."
To combat headwinds in the sector, malls are organising unique events and promotional activities to increase footfall, she said. Paragon, for example, held an Infiniti Showcase event in September in conjunction with the Formula 1 Singapore Grand Prix, featuring several award-winning show cars as well as an F1 simulator.