SINGAPORE - Retail rents dipped in the second quarter of 2015 as slowing retail sales and visitor arrivals led to a negative net absorption of 270,000 sq ft of retail space islandwide for the first quarter of this year, DTZ Debenham Tie Leung (SEA) said in a report on Tuesday.
Orchard and Scotts Road recorded a negative net absorption at 80,000 sq ft, while other other city areas saw a negative net absorption of 170,000 sq ft. Suburban areas registered a lower negative net absorption, at 20,000 sq ft.
Net absorption is defined as the difference between tenant move-ins and move-outs over a period of time.
Within Orchard and Scotts Road, occupancy rate dipped by 1.6 percentage point quarter-on-quarter to 92.7 per cent in Q1. Similarly, average rents fell by 1.5 per cent quarter-on-quarter to about $29.70 per sq ft in Q2.
According to URA figures, retail rents islandwide declined by 0.3 per cent in Q1, after a 0.5 per cent increase in Q4 last year.
The lack of new retail completions and pipeline supply in Orchard and Scotts Road, however, ameliorated the decline in average rents, DTZ said. Only about 10,000 sq ft of retail space was introduced in Q1 with the completion of Claymore Link, said the real estate agency.
Corresponding to the negative net absorption in the other city areas (232,000 sq ft), occupancy rate in those areas fell by 2.8 percentage points quarter-on-quarter to 90.4 per cent in Q1. Additionally, the introduction of approximately 111,500 sq ft of retail space in the other city areas in Q1 had added downward pressure on the rents. In Q2, average rents in the other city areas declined by 1.8 per cent quarter-on-quarter to $17.65 per sq ft.
With about 876,000 sq ft of pipeline supply in retail space for the rest of the year, rents could fall further.
Amid weakened performance in the retail sector, landlords are offering new-to-market brands and new retail concepts to inject vitality into the market, said Ms Anna Lee, DTZ's Director of Retail.