Retail rents in central region rise after sliding for 12 quarters

Retail rents in the central region have posted their first increase after 12 consecutive quarters of decline, according to data yesterday.

The Urban Redevelopment Authority rental index inched up 0.1 per cent in the first quarter for that zone over the final three months last year. That is the first quarter-on-quarter rise since the fourth quarter of 2014.

The index of retail space prices in the central region also inched up 0.1 per cent in the first quarter of this year over the fourth quarter of 2017.

The amount of occupied retail space remained unchanged in the first quarter compared with an increase of 64,000 sq m net lettable area (NLA) in the previous quarter. The stock of retail space rose by 11,000 sq m NLA compared with a rise of 18,000 sq m in the fourth quarter of last year.

As a result, the islandwide vacancy rate of retail space increased to 7.5 per cent as at March 31 from 7.4 per cent in the previous quarter.

Mr Desmond Sim, CBRE's head of research for Singapore and South-east Asia, said that while the 0.1 per cent rental rise in the central region "is deemed minor, it is an indication that the retail rental market is showing signs of bottoming out and achieving stability".

That said, Mr Sim does not expect a rebound of retail rents but more stable and sustainable growth in the mid to long term.

"Prime floors in shopping malls remain highly sought after, while occupancy pressures may still loom for secondary corridors and secondary floors," he added.

"Nonetheless, the cutback in future retail supply over the next few years may lend support to an equalisation of demand and supply."

Cushman & Wakefield Singapore research head Christine Li noted: "Despite the tough operating environment, retailers are still keen on taking up space at suburban malls as the shopper catchment and footfall at these malls remain healthy."

Meanwhile, the rental index of office space in the central region rose 2.6 per cent in the first quarter over the fourth quarter of last year.

It was the third consecutive quarterly rise since the index bottomed in the second quarter of 2017.

The prices of office space in the central region rose 1.3 per cent in the first quarter, a slower pace of increase than the 2.7 per cent lift in the previous quarter.

There was a supply of about 791,000 sq m gross floor area of office space in the pipeline as at March 31, up 32.5 per cent from the the previous quarter.

The amount of occupied office space increased by 14,000 sq m NLA in the first quarter compared with a rise of 55,000 sq m in the previous quarter.

The stock of office space rose by 11,000 sq m NLA in the first quarter compared with a decrease of 4,000 sq m in the previous quarter.

That left the islandwide vacancy rate at 12.5 per cent as at March 31, from 12.6 per cent at the end of the previous quarter.

Colliers International said the first-quarter office rent index for the central region reflects a cumulative recovery of 7.7 per cent in less than a year since the index bottomed in the second quarter of last year.

Mr Sim of CBRE added: "Office rents are expected to continue growing till the next supply influx post-2020."

A version of this article appeared in the print edition of The Straits Times on April 28, 2018, with the headline 'Retail rents in central region rise after sliding for 12 quarters'. Print Edition | Subscribe