Retail Rents Expected to Rise in H2 2010

FF Fashion

Mar 23, 2010
PropertyGuru.com.sg

According to DTZ Research, retail rents across Singapore were steady for the first three months of the year.

However, analysts said that retail rents could increase moderately in the second half of 2010, as economic conditions are showing signs of improvement.

Tourists and shoppers are boosting retail sales, helping rents to remain firm in Q1 2010.

At Orchard and Scotts Road, monthly gross rents for prime first-storey space stayed at $39.70 psf, while upper-storey retail space went for $20.50 psf.

In other parts of the city, the monthly gross rents of prime first-storey retail space remained at $24.40 psf, while upper-storey retail space in the same areas fetched monthly rents of $14.00 psf.

Monthly gross rents for first-floor prime space in suburban malls were $33.50 psf, while those on the upper floors cost $22.80 psf.

"If the economy in Singapore and those around us continue to do well, definitely it will boost consumer confidence even more later on in the year, and that will have an impact on retail sales...So on the whole, the outlook will be more positive. We expect rent to grow moderately this year between 2 to 5 per cent this year," said Chua Chor Hoon, research head of DTZ Debenham Tie Leung in Southeast Asia.

According to several analysts, landlords are facing resistance on rising rents despite the rosy outlook.

With new retail space coming up this year, tenants may also hold out for lower rents.

Three developments with net lettable areas of more than 1.1 million sq ft are expected to be ready by the end of 2010.

Analysts are expecting the vacancies in Orchard Road to increase, as tenants move to new malls.

Barring another economic crisis, rising interest rates and inflation could also affect retailers, said market observers.

"The suburban malls will be more resilient compared to the Orchard Road and city malls. That is because there is a fundamental local catchment around the suburban malls, and the suburban retailers provide more basic goods and services to serve this local catchment," said Ms. Chua.

As most retailers have completed their plans of relocation and expansion last year, leasing demand is expected to be modest in the upcoming months