Trade tensions and a gloomy economic outlook could stifle any near-term recovery for the retail and industrial property markets, said Colliers International yesterday.
Ms Tricia Song, its head of research for Singapore, said: "With the dimmer outlook ahead, we expect the retail and industrial property markets to face some pressure.
"A prolonged economic downturn, should it happen, will likely crimp consumer confidence, resulting in cutbacks on discretionary spending among households.
"Meanwhile, industrialists may be more cautious and could shelve expansion plans. That said, there are pockets of opportunities for investors in both markets that will likely provide a decent yield."
Retail rents remained weak in the first six months this year.
Colliers Research data showed that ground-floor rents in Orchard Road fell 1.5 per cent in the first half to $40.60 per sq ft per month (psf pm) from the last six months of last year, while regional centre rents were flat at $33.60 psf pm.
Colliers Research noted that rental declines have slowed since early last year and that the large retail space completions since 2013 should taper off from 2020, helping to support occupancy.
One mall slated to open later this year is PLQ - the 340,000 sq ft retail part of Paya Lebar Quarters.
Islandwide retail vacancies declined by 0.8 percentage point from the second half of last year to 7.7 per cent in the six months to June 30 this year, likely boosted by the good take-up at Jewel Changi Airport and Funan mall.
Colliers Research expects the vacancy rate to continue to decline over 2020 to 2023 as supply eases.
"Investors should focus on malls with high population catchment and asset enhancement potential," said Ms Song and Ms Shirley Wong, associate director of research at Colliers International.
Meanwhile, retail transaction volumes jumped 137 per cent over the second half last year to reach $2.13 billion - markedly higher than the $1.42 billion transacted in the whole of last year, Colliers International said.
Ms Song added: "Headwinds prevail for the retail sector as the soft economy could impact the still-fragile consumer sentiment and dent any hopes of recovery in retail rents.
"On a more positive note, the surge in investment sales of retail malls in (the first half) reflected rising optimism among investors.
"We observed that the buyers of these malls are... Reits (real estate investment trusts) seeking yields or redevelopment potentials, while institutional funds look for yields and value-add opportunities."
Separately, the industrial real estate sector seemed to have found its footing, with overall rents bottoming out, Colliers International said.
However, deteriorating manufacturing and trade statistics could put pressure on industrial rents and occupancy.
Mr Dominic Peters, senior director of industrial services at Colliers International, said: "Industrialists have already become more cautious on their space requirements, renewals and expansion plans, preferring a wait-and-see approach given the gloomier economic outlook.
"For landlords, we would recommend that they take this opportunity to consider upgrades and asset enhancements - especially for ageing properties."