2013-03-27

The latest quarterly report by Colliers International revealed that the retail property market in Singapore is set for a stable year in 2014.  The first quarter of the year saw prime retail rents being supported by continued openings of local and international brands, initial signs of improving consumer sentiments, as well as a steadily-growing tourism industry, as Singapore cements its status as a major regional city. 

Rents

In 1Q 2014, the average monthly gross rents of prime ground floor retail space in Orchard Road rose by a slight 0.1 per cent on a quarter-on-quarter (QoQ) basis to S$36.50 per sq ft.  

Similarly, the average monthly gross rents of prime retail space in the Regional Centres also increased by 0.1 per cent QoQ to S$33.50 per sq ft, after remaining flat at S$33.46 per sq ft in 4Q 2013.  

On the back of a steady growth in tourism, improving retail sales and greater economic certainty, local enterprises have been seizing the opportunity to set up new shops and eateries, while more international retail brands have been looking to establish their presence in Singapore.  

Consequently, the prime retail rents in both micro-markets were supported by the continued opening of stores, and food and beverage (F&B) outlets during the quarter.

Of significance, the opening of new F&B outlets in the Central Business District (CBD) has been gaining traction – in line with the district’s gradual transformation into a location where human activity is increasing beyond typical office hours on weekdays.  While the F&B outlets in the CBD are already enjoying regular and consistent patronage in volume during lunch hours, they are also tapping into an increasing residential population in the area, as well as a growing office population – given that Marina Bay Financial Centre, and Asia Square Tower 1 and 2 are filling up with new or expanding companies.  

Mr Calvin Yeo (杨光伟), Deputy Managing Director at Colliers International, says, “The increase in the number of office workers translates into more business lunches, coffee meetings and a burgeoning after-hour crowd.  To capture the crowd, some F&B outlets have also begun offering dual concepts – a restaurant or café to cater to the lunch time crowd in the day time, before transforming into a watering hole for patrons who can visit after work.”

On the shop space front, international lifestyle and fashion brands are establishing or expanding their presence in reputable malls or premier locations in Singapore, whenever opportunities arise. 

For instance, fashion brand, H&M, re-opened its largest flagship store in Southeast Asia at Grange Road in January, expanding from three levels to four, spanning 42,000 sq ft. Christian Dior Parfums opened one new boutique at Ion Orchard and another at The Shoppes at Marina Bay Sands in February; of which the latter 1,550 sq ft boutique is the brand’s largest in Singapore. 

Other upcoming openings included New York-based brand, Alice + Olivia by Stacey Bendet, which will open a 1,500 sq ft boutique at Ion Orchard – its first Southeast Asia store; American fashion label, Proenza Schouler, which will take up 1,250 sq ft of space at The Shoppes at Marina Bay Sands; and Metro, which took over from Robinsons to be the anchor tenant of The Centrepoint, at 130,000 sq ft of retail space spanning across six levels.   

Capital Values

As of the end of 1Q 2014, the average imputed capital value for prime strata-titled retail space in Orchard Road remained unchanged from that recorded in 4Q 2013 at S$6,942 per sq ft. 

Meanwhile, the average imputed capital value for prime retail space in the Regional Centres saw a moderate improvement of 1 per cent QoQ to S$4,491 per sq ft in 1Q 2014. 

There were not much activities in the strata-titled retail sales market in 1Q 2014, due to the continued effects of the Total Debt Servicing Ratio. The total number of caveats lodged for strata-titled retail space in the Urban Redevelopment Authority’s Real Estate Information System is expected to come in at just under 70 transactions in 1Q 2014, approximately 63 per cent lower than the 190 caveats registered in 4Q 2013. 

Outlook 

An influx of new retail offerings is expected in 2014, with an estimated 2.7 million sq ft of new lettable retail space in the pipeline.  

Approximately 405,000 sq ft of retail space is envisaged to be completed in Orchard Road during the year.  For instance, the notable completions in 1H 2014 include Orchard Gateway (172,000 sq ft), the refurbishment of Shaw House (95,000 sq ft) and 268 Orchard Road (86,400 sq ft).  

Retail space offered in unique formats, such as the Singapore Sports Hub (some 309,000 sq ft) in Kallang and the Big Box, a retail warehouse (approximately 260,000 sq ft) in Jurong, will make for a more varied retail landscape in 2014. 

With visitor arrivals expected to grow by between 5.2 per cent and 8.4 per cent this year, it is a compelling factor for local retail and F&B enterprises, as well as international brands to establish or expand their presence in the market.  

Ms Chia Siew Chuin (谢岫君), Director of Research & Advisory at Colliers International, concludes, “Considering the above factors, the average monthly gross rents is expected to remain muted within a range of -1 per cent to 2 per cent for prime ground floor retail space in Orchard Road, while those in the Regional Centres could witness a slightly stronger rental growth of between 1 per cent and 3 per cent in 2014.” 

She adds, “Over in the strata-titled retail space market, which also accounts for mixed-use developments, the outlook remains fairly subdued, with prices of prime strata-titled retail units in both Orchard Road and the Regional Centres likely to plateau for the entire year.”