Tag Archives: Retail Rental

Retail rents down 1.2% in Q4, culminating in 5.9% full-year drop: DTZ

AVERAGE island-wide first-storey retail rentals have fallen by 1.2 per cent in Q4 2015, compared to the last quarter, to about S$30.50 per square foot (psf), DTZ data showed on Wednesday.

This is the third consecutive decline since Q2 2015.

For the whole of 2015, average first-storey rents fell at a faster pace of 5.9 per cent, compared to the slower decline of 0.3 per cent in 2014.

“Much of the decline in 2015 was attributed to weakened consumer sentiments amid uncertain global economic conditions,” DTZ noted.

Among the various regions, rents in Orchard/Scotts Road were the most resilient. Average first-storey rents in Orchard/Scotts Road saw a gentler decline compared to the other regions, falling by one per cent quarter-on-quarter (q-o-q) and 5 per cent year-on-year (y-o-y) to S$38.05 psf in Q4 2015.

They were supported by the lack of new completions in the next four years. Only pockets of new retail spaces will be added via renovations and other mixed-use projects, it said.

Average first-storey rents in the suburban areas were also quite resilient, dipping by 1.2 per cent q-o-q and 5.7 per cent y-o-y to S$30.70 psf in the same period.

In contrast, average first-storey rents in the other city areas registered a greater decline of 1.4 per cent q-o-q and 6.9 per cent y-o-y to about S$21.80 psf in Q4. This was largely due to the area’s dependence on the weekday office crowd for sales volume, DTZ added.

The Urban Redevelopment Authority is expected to release full fourth-quarter price and rental data for retail space on Jan 22, 2016.

BT – 13 Jan 2016

Waning rents, tenant demand prompt malls’ repositioning

IN the heyday of the retail-property market, many landlords were eager to slice retail spaces into smaller units to lease out at higher rents per square foot. Now in the face of softening rents and dwindling tenant sales, some landlords are changing tack to lure back the bigger tenants they were once inclined to shoo away.

While this curating of tenant mix may lend support to mall occupancies and footfall, it will do little to reverse an anticipated fall in retail rents next year.

Projections for retail rental declines in 2016 go as far as 5 per cent, judging from consultants’ estimates. For one thing, the looming supply of retail space is worrying.

Based on the past three-year average annual net demand for retail space island-wide and assuming a similar level of space take-up ahead, it will take close to four years to absorb the upcoming new retail space, Knight Frank head of research and consultancy Alice Tan said.

“With an estimated 2.44 million sq ft of gross retail space to be completed next year, the search for retailers to fill both existing and new spaces is slated to intensify,” she said, pegging her average rent forecast in the Central Region to a 3-5 per cent drop for 2016.

Expecting up to a 3 per cent decline in retail rents island-wide next year, Chesterton Singapore’s managing director Donald Han sees the same issues of manpower crunch, lower tourist arrivals and the strong Singapore dollar as well as competition from e-commerce continuing to plague retailers next year.

While data from the Urban Redevelopment Authority showed a 2.9 per cent drop in retail rents in the Central Region (covering 22 planning areas that include the central area and fringe area, which extends to Queenstown, Geylang, Bishan and Sentosa) over the first three quarters of this year, specific baskets tracked by some consultants registered a bigger drop. DTZ’s recent report flagged a 3.7 per cent quarter-on-quarter fall to S$30.90 per sq ft in the third quarter for average prime first-storey rents island-wide, the lowest since the first quarter of 2006.

An overcapacity in retail space and weak tenant demand have prompted retail landlords to review their leasing strategy, Mr Han observed.

“In the past, it was about cutting up large valuable retail space, cutting up into smaller areas and achieving higher rents per square foot (psf). Now it’s about maintaining occupancy and preserving rents, keeping a balance in large and small retail tenant mix,” he said.

While tenants occupying large gross floor areas may pay lower rents on a psf basis (even paying single-digit dollar per square foot per month in some cases), they can drive higher footfall traffic into the mall, Mr Han pointed out.

“Some anchor tenants like commercial schools and medical centres provide ready and captive customers during the weekdays to shopping malls. Students, for instance, require F&B amenities during lesson breaks and they feed into the mall’s retail offering.”

A large tenant instead of more smaller tenants will mean less work for the landlord in terms of lease management – and the landlord does not need to provide as much space for walkways, Mr Han noted.

This is why some landlords have turned to less conventional tenants such as childcare or daycare centres and fitness centres as they are able to draw traffic to the malls.

Large tenants have sprung up in some shopping malls in the city centre, consultants noted. Among them, Raffles Medical opened a multi-disciplinary medical centre at newly renovated Shaw Centre in June and Harvey Norman just expanded its store space at Millenia Walk with the opening of its new 100,000-sq-ft flagship outlet in the mall.

More new-to-market concepts have also emerged. Top Japanese cooking school ABC Cooking Studio opened at Takashimaya in April this year, while Millenia Walk ushered in a new indoor snow sports centre, Urban Ski, in July. Knightsbridge is set to feature Singapore’s first Apple store next year.

Marina Square also welcomed Emporium Shokuhin, Singapore’s first integrated Japanese emporium that took up over 34,000 sq ft of space, in September and South Korean Pororo Park, which opened its first and largest South-east Asian character-themed indoor playground spanning 11,000 sq ft at Marina Square’s new retail wing last month. BT understands that a major commercial school is also looking at taking up some 100,000 sq ft of space at Marina Square.

With heightened competition for a limited pool of established retailers, landlords are now more open to new retail concepts which are either destination-centric or offer unique brand positioning, Ms Tan observed.

The strategy of attracting activity-driven tenants is paying off for Pontiac Land’s Millenia Walk.

“Over the past year, Millenia Walk has yielded double-digit growth for our rental reversions, and increased occupancy by over 20 per cent,” said Orphelia Huang, assistant manager for corporate communications at Pontiac Land, which is targeting above-95 per cent occupancy rate for the mall next year.

Among other things, Millenia Walk has also brought in specialised F&B offerings with the opening of Nihon Street where each Japanese food outlet already has a strong existing following, and reached out to male shoppers with new brands. “For 2016, we will continue our strategy to carefully curate our selection of tenants,” Ms Huang said.

In the varied retail landscape, there are department stores which will likely continue to consolidate in the near term amid weak retail sales, high business cost and manpower constraints, said Cushman & Wakefield research director Christine Li.

Just this year alone, Marks & Spencer vacated The Centrepoint, John Little closed its Marina Square and Tiong Bahru stores and Metro closed its outlet at Compass Point in August and will be closing its City Square Mall outlet by the end of this year. Wing Tai, which carries brands such as G2000 and Topshop in Singapore, has said it plans to close some of its retail outlets.

The challenging retail environment is keeping landlords on their toes to refresh their mall offerings.

CapitaLand recently converted Tampines Mall’s level 5 open roof to a new education hub with well-known educational centres such as Yamaha Music School, Julia Gabriel Centre, MindChamps and Stalford Learning Centre. It is also redeveloping Funan DigitaLife Mall into an integrated development.

Malls which are part of an integrated development are able to tap into ready catchments of residents, working professionals and business and leisure travellers, said CapitaLand Mall Asia head of retail management for Singapore Teresa Teow. “To serve the needs of shoppers who use our malls as one-stop lifestyle destinations, we are increasing the percentage of retail space allocated to F&B, from about 19 per cent five years ago to about 22 per cent currently.”

Similarly for Frasers Centrepoint malls, the proportion of F&B tenants has increased. At Causeway Point in Woodlands, the proportion of net lettable area of F&B was 16.3 per cent in 2010 (before upgrading), compared with the current 23.1 per cent. In other malls such as Changi City Point, the F&B proportion is even higher, said a spokesman for Frasers Centrepoint Asset Management, the manager of Frasers Centrepoint Trust.

Tan Sulian, senior director for retail at Savills Singapore, said: “Landlords who are more proactively adjusting their trade mix and tenant mix will result in better occupancies and rents because eventually they will attract better tenants, who are also more willing to pay better rents.”

BT – 21 Dec 2015

Rental gap narrowing between suburban and Orchard malls

THE rental gap between prime spaces in suburban malls and Orchard malls has been narrowing – and this trend is slated to continue into 2016.

Property consultants noted that the relative resilience of suburban malls stems from their larger local catchment and lower susceptibility to tourist spending, which has been dealt a blow from lacklustre tourist arrivals and competition from other global cities for their spending.

While the retail rental index of the Urban Redevelopment Authority (URA) for the Central Region showed a 2.9 per cent drop in retail rents over the first three quarters of this year, the Central Area marked a bigger 3 per cent drop compared to a 2.4 per cent decline in the Fringe Area.

URA’s retail rental indices do not track malls located in the far-flung areas of Jurong, Tampines and Yishun, though rental data by unit size, floor level and district is available on its website.

Data from consultancy firm Savills shows that prime-facing spaces in Orchard malls have fallen by a bigger 4 per cent over the first three quarters of this year, compared to 2.9 per cent in suburban malls.

“On the whole, we still haven’t seen any concrete plan to arrest the pilferage of sales from online retailers who are waging a guerrilla war against sitting targets,” said Savills research head Alan Cheong.

He expects rents in suburban malls to dip by up to 2 per cent and those in Orchard malls to fall by a bigger 3-5 per cent next year.

Based on Knight Frank’s computations, the rental premium of prime retail spaces of Orchard Road malls over suburban malls has been steadily shrinking over the last three years. The average prime rent of Orchard Road malls was 1.09 times of that in suburban malls in the last nine months this year, down from 1.12 times and 1.13 times in 2014 and 2013 respectively.

“This demonstrates the higher resilience of suburban mall prime space rents compared to Orchard Road’s,” said Knight Frank head of consultancy and research Alice Tan. “Nonetheless, the limited availability and limited upcoming supply of new retail spaces in Orchard Road should limit rental declines for Singapore’s prime shopping belt going forward, keeping rental premium between Orchard Road and suburban prime retail spaces at similar levels for 2016.”

Some Orchard Road malls have found it hard to gain traction. Wheelock Properties’ Scotts Square has seen many of its tenants come and go since its opening in 2012. Shaw Centre has similarly failed to ramp up its occupancy and pull in customers since its revamp last November.

Far East Organization’s Orchard Central, now 85 per cent occupied, will be undergoing a revamp until Q3 2016, during which 17 per cent of its tenants will have to close or relocate by Dec 31.

Cushman & Wakefield research director Christine Li noted that popular retail brands previously present only in Orchard Road have made their way into suburban malls, hence diluting retail sales in Orchard malls.

Looking at prime-facing retail units on ground floor of not more than 3,000 square feet, Ms Li is projecting a 3-3.5 per cent drop in rents in Orchard Road, a 4 per cent fall in the city-fringe, and stable rents for suburban malls next year.

A spokesman for Frasers Centrepoint Asset Management, the manager of Frasers Centrepoint Trust (FCT) which owns a number of suburban malls, stressed that suburban malls have very localised catchment, roughly 3-5km radius in the primary catchment and slightly further afield if the mall is easily accessible by MRT or bus.

“We think the outlook for suburban malls should remain stable in general, as consumption in this sector are mostly necessity spending,” he said.

FCT finished the financial year ended Sept 30 with an average rental reversion of 6.3 per cent. Its manager is further tweaking tenant mix at Changi City Point and Bedok Point, where occupancies were 91.1 per cent and 84.2 per cent respectively as at Sept 30. Its Northpoint shopping centre in Yishun is being expanded as part of the integrated Northpoint City project.

“In most instances, the challenge is not so much in finding a tenant as there is always interest in space in suburban enclosed malls. It is more a question of finding the correct tenant that is also willing to pay the target rent,” FCT manager’s spokesman said. “Occupancy-wise, we should be able to maintain our current level or improve slightly over our last financial year.”

But not all suburban malls are faring well too. Consultants note that there is greater competition in Jurong East where there are five malls in the same catchment – namely JCube, JEM, WestGate, Big Box and IMM Building.

“While household and office population there is on the rise, the majority of homes and offices are still under construction and the newly completed malls have injected more supply at a faster rate than demand,” said Chesterton Singapore managing director Donald Han.

Woes of JCube arose with the proliferation of malls in the Jurong East regional centre in recent years. Since Jem and Westgate opened across the road in 2013, JCube’s occupancy rate has been on a slide since end-2013 from 100 per cent to 83.7 per cent as of Sept 30 this year. Though it has undergone several rounds of mall repositioning, one industry player felt that the mall has not yet found its “identity”.

“Both JCube and IMM are undergoing a series of asset enhancement initiatives. We think the malls here may underperform other areas where there are less mall competitors such as Junction 8, Causeway Point or Bedok Mall,” Mr Han said.

CapitaLand’s Tampines Mall and Junction 8 marked full occupancy as at Sept 30 and some asset enhancement works are ongoing for Tampines Mall.

When asked about its malls in Jurong Gateway, CapitaLand Mall Asia head of retail management for Singapore Teresa Teow explained that the three malls are positioned differently to complement each other, with Westgate serving as a premier lifestyle and family mall, IMM Building as Singapore’s largest outlet mall, and JCube being a leisure and entertainment hub in the west that houses Singapore’s only Olympic-size ice rink.

JCube recently added a trendy retail zone, J.Avenue, that houses 100 shops offering chic, affordable merchandise. “We continually reinvent our malls to ensure that they stay relevant and attractive to shoppers,” Ms Teow added.

Large landlords such as CapitaLand and Frasers Centrepoint are also embracing technology, making their rewards programme available via mobile apps.

CapitaLand’s Capitastar goes further to glean the shopper preferences of some 800,000 Capitastar members in Singapore from the aggregated data, which enables CapitaLand to work with retailers to push out targeted retail offerings through the Capitastar mobile app.

Consultants note that malls which are connected to an MRT tend to do well. Size matters too, Mr Han added, with larger malls of more than 200,000 sq ft in net lettable area able to enjoy economies of scale and provide a variety of tenant-mix offering to consumers.

Ms Tan noted that while landlords are now more receptive to negotiate rentals with established retailers, the current structure of base rents vis-a-vis variable rents has not changed much, with limited room for adjustment.

BT – 21 Dec 2015

Prices of office space up, retail space down in Q2: URA

Prices of office space rose 0.3 per cent in the second quarter compared to the previous quarter, while prices of retail space fell 0.5 per cent, the Urban Redevelopment Authority (URA) said on Friday (Jul 24).

Rentals of office space fell 2.6 per cent in the second quarter, compared with the 0.6 per cent increase in the first quarter. Rentals of retail space decreased by 0.5 per cent, compared with the 0.3 per cent decline in the January to March period.

As of end-June, there was a total supply of about 962,000 sqm gross floor area of office space from projects in the pipeline, and a supply of 774,000 sqm of retail space, URA said.

The amount of occupied office space increased by 38,000 sqm, compared to the 19,000 sqm increase in the previous quarter, while occupied retail space remained unchanged. The stock of office space increased by 8,000 sqm, while retail space increased by 25,000 sqm.

The islandwide vacancy rate of office space at the end of second quarter fell to 9.8 per cent, from 10.2 per cent at the end of the first quarter. Vacancy rate of retail space rose to 7.2 per cent, up from 6.8 per cent in the previous quarter, URA said.

Source : Channel NewsAsia – 24 Jul 2015

Orchard Road retail rents scrape four-year low

When Singaporean Hidayu Mustaafa craves for retail therapy, she walks to a mall five minutes from her home in the eastern suburb of Tampines instead of bussing down to Orchard Road – the island-state’s shopping Mecca.

That is bad news for Orchard Road’s glitzy malls, which showcase brands such as Inditex’s Zara and H&M, as well as luxury names like Chanel and Prada. Increased competition from suburban malls and online retailers, combined with falling tourist numbers from China and Indonesia, have hurt spending and pushed retail rents to their lowest since 2011.

Average monthly gross rents of prime retail space on Orchard Road slipped 1 per cent in the second quarter from the previous three months to S$37.79 per square foot, according to Cushman and Wakefield.

“It is more imperative than ever that shopping malls need to innovate and refresh shopping experiences to stay ahead of the competition,” said Ms Christine Li, the real estate consultant’s research head in Singapore, adding that less established malls with little differentiation will underperform.

At least one mall has recently decided to revive its offerings. Wheelock Properties’ Scotts Square, where occupancy rates have been on a downtrend, said it would bring in names like fashion label Alexander McQueen and Belgian fine leather goods maker Delvaux.

Cushman and Wakefield’s Li expects Orchard retail rentals to fall 2.1 per cent by end-2015 from the end of June, while suburban mall rentals could prove more resilient and remain flat. “It’s a very challenging retail environment still for Orchard Road, but the bright spot is that there is no (new) supply in market (until 2018),” she said.

Source : Channel NewsAsia – 13 Jul 2015

Retail rental market operates without much Government interference: MTI

The Government, as a general principle, allows the market to operate without having to prescribe how landlords and tenants structure their leases, said Minister of Trade and Industry Lim Hng Kiang. Stepping in would lead to inefficient outcomes and make all parties worse off, he added.

Mr Lim said this on Monday (May 11) in a written parliamentary response to a question by Member of Parliament Lee Bee Wah, who asked if the Government will consider introducing measures to help small retailers in shopping malls, such as by disallowing the practice of landlords pegging the rental charge to a tenant’s sales volume when renewing leases.

Ms Lee also questioned if the Government could introduce a platform by which tenants can take reference on what should be the fair market rates for shop rent.

Mr Lim said that companies have other means to manage their rental consts, such as by referring to the Business Leasing Guide by the Singapore Business Federation, which was released in January this year.

The minister added that information on retail rates is publicly available on the Urban Redevelopment Authority’s website, and that the data is updated every quarter.

Source : Channel NewsAsia – 11 May 2015

Shopping mall rents set to fall in 2015: Savills

Rents for shops and restaurants in Singapore are expected to fall this year, with prime rents on Orchard Road forecast to recede by 3 to 5 per cent and rents in suburban malls by up to 3.0 per cent, real estate services firm Savills said in a report on Wednesday (Feb 11).

“It appears that landlords in the prime shopping districts are beginning to hold out olive branches to retailers, many of whom are confronted with the twin woes of higher fixed costs and lower sales,” said Mr Alan Cheong, Savills Research senior director for Singapore, in the report.

Much of the new retail space coming onto the market in 2015 will be in central areas, unlike in 2014 when most of the new supply was in suburban areas.

Developments with large retail areas that are slated to open this year include Capitol, the National Gallery Singapore and South Beach.

Singapore retailers have been hurt by rising labour costs and falling visitor arrivals. The latest available data showed retail sales excluding motor vehicles dipping 0.4 per cent year-on-year in Nov 2013, while the Singapore Tourism Board said that international visitor arrivals totalled 15.1 million last year, a 3.1 per cent drop from 2013′s record figure of 15.6 million.

Savills, however, expects vacancy rates at malls to remain low this year as any easing of rents would see revived interest from potential tenants.

For the fourth quarter of 2014, Savills estimates prime retail rents on Orchard Road will be moderated by 5.0 per cent from the third quarter to S$32.90 per square feet per month – the first decline after four consecutive lull quarters.

But prime suburban mall rents are expected to hold firm at S$31.10 per square feet per month, as businesses remain resilient in malls that serve a large population catchment.

Source : Channel NewsAsia – 11 Feb 2015

Shopping mall rents likely to stay flat this year: Colliers

Shopping mall rents in Singapore are likely to stay flat for a second year in a row, held down by strong resistance on the part of retailers already struggling with high costs, property services firm Colliers International said on Tuesday (Jan 6).

Colliers estimated that for the whole of 2014, the average monthly gross rents of prime retail space in Orchard Road slipped by 0.8 per cent year-on-year, while rents in regional centres edged up by 1.1 per cent year-on-year.

Looking ahead, Colliers said it expects rents for prime ground-floor retail space in the Orchard Road district to range between a drop of 1 per cent and a rise of 1 per cent for 2015. As for regional centres, rents could plateau at between 0 per cent and 2 per cent.

“Retail rents are expected to continue to be at a standstill for 2015, as the positive interest from retailers to set up shop or expand will still be matched by retailers’ resistance to any increases in their operation cost in a challenging operating environment,” Colliers’ Director of Research & Advisory Chia Siew Chuin said in a statement.

Calvin Yeo, the firm’s deputy managing director, added that Singapore’s retail scene has also changed, with more retailers and food and beverage (F&B) operators opting for niche locations such as the shophouse enclaves in Tanjong Pagar, Kampong Glam and Joo Chiat.

Some firms have also chosen to operate from obscurely-located industrial buildings or remote and private sites away from the hustle and bustle of urban life, he added.

“Many of these hidden gems position themselves to provide an uncommon ethnic or relaxed ambience, and are unfazed by the fact that they are not located amid heavy pedestrian traffic.”

Source : Channel NewsAsia – 6 Jan 2015

Isetan wants to put new tenants in Wisma Atria – will it work?

With new shopping malls coming up along Orchard and new retailers entering the scene, change is afoot at Singapore’s prime shopping belt.

Just recently, book retailer Kinokuniya moved to small premises within Ngee Ann City, allowing the landlord to carve out the space once occupied by the bookshop into smaller units – for various tenants.

At Wisma Atria next door, Japanese retailer Isetan is also changing tack. Isetan announced last week that it would stop running its own retail operations there and instead introduce new tenants in the space. It plans to provide facilities management at the premises.

Isetan holds about a 25 per cent stake in Wisma Atria, giving it flexibility over its own retail area. The department store retailer stressed that it is not pulling out from Orchard Road, as it still has the Isetan Scotts Store at Shaw House.

Analyst Mr Chris Koh, director of Chris International, said the move by Isetan to consolidate its retail business is a good one. “The one at Scotts does pull quite a bit of a crowd. So I guess it makes a lot of corporate and business sense to perhaps to move all their retail business to just one store, and then have Wisma managed in a different manner.”

However, even as it seeks new tenants for its space at Wisma, the key to attracting crowds lies in having the right tenant mix, and perhaps tapping on its connections to bring in the Japanese touch so as to distinguish the mall from its competition.

“Looking at rents in Orchard, a lot depends on the building, the shopping mall, the age of that mall and that will decide the amount of rent that you can collect,” said Mr Koh. “Rents in that area would be anything in the range of S$12 to S$15 per square foot. It depends on the concept that is created – if you have one that gets a lot of shoppers coming in, and you have a high shopping traffic, you probably will be able to collect higher rents.”

Orchard Road receives more than 7 million visitors each year, and is a popular shopping destination for tourists from across the region.

Source : Channel NewsAsia – 29 Dec 2014

Orchard Road rents expected to dip slightly this year: Savills

Prime Orchard Road rents are expected to dip slightly this year as some restaurants look for cheaper space on the fringes of the city-centre, Savills said in a report on Friday.

Rising manpower costs in a tight Singapore labour market are also discouraging retailers from expanding, contributing to the downward pressure on rents, the UK property services firm said.

Savills said it expects rents at prime Orchard Road malls to fall by around 2 per cent this year from current levels of around S$34.6 per square foot per month.

But retail rents outside the central area could edge higher by around 1.5 per cent from around S$31.1 per square foot, as consumer sentiment remains strong, because businesses operating in the prime suburban malls tend to be more profitable.

Source : Channel NewsAsia – 28 Feb 2014