The outlook for Singapore’s retail sector for the last three months of the year remains subdued, with weak retail rents made worse by retailers consolidating outlets to streamline cost, reports Knight Frank (KF).
The average gross rents for prime spaces was $31.20, which represents 2.2% decline YoY and 0.2% dip on a quarterly basis. Average Orchard Road prime rents, meanwhile, declined by 0.1% YoY and 0.5% QoQ.
According to KF, average rents in the Central Region are envisaged to fall by 6.0% to 8.0% y-o-y by Q4 2016, while the more resilient prime rents to moderate downwards by up to 3.0% y-o-y in the same period.
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“The expected fall in rents takes into account not only the projected weakened demand from retailers, but also the likelihood of landlords readjusting the rental structures to help their tenants tide over down cycles of the market in order to maintain healthy occupancy status,” it said.
KF’s bearish outlook on Singapore’s retail sector is supported by the following indications of weak overall spending:
1. Singapore’s consumer confidence
According to the Mastercard Index of Consumer Confidence, Singapore saw a significant decline of 10.7 points in H1 2016 from H2 2015.
2. Overall retail sales index
On a year-on-year basis, the overall retail sales (at constant prices) declined by 3.7% in July 2016, with Computer & Telecommunication Equipment (-18.7% y-oy) trades seeing the steepest falls.
3. Employment rate
Employment in the wholesale and retail trade declined by 1.8% in H1 2016 compared to H2 2015. This could be attributed to the weaker retail sales and greater caution in manpower deployment by retailers.
4. Total visitor arrivals
Total visitor arrivals for the period of January to July 2016 increased by 11.5%, compared to the same period last year, to reach 9.8 million. However, visitors from China and Indonesia rose by 49.2% y-o-y and 6.8% y-o-y respectively in the first seven months of 2016.
(Source: Singapore Business Review)