According to URA statistics, retail rents decreased 2.7% in 3Q20201, but prices for retail properties remained flat.
This is the 7th consecutive quarter of retail rents falling, a significant increase from the 0.5% drop in 2Q2021. CBRE’s head of Southeast Asia research Tricia Song notes that retail rents fell 21% in 4Q2019 compared to pre-Covid-19 levels.
Song states that the rents continue to fall because of Covid-19’s evolving situation and decreased footfalls due in part to safe management measures.
On a positive note, however, the retail space vacancy rate decreased to 8.1% from 8.5% in the previous quarter. Song noted that all segments saw a decrease in vacancy rates, with the exception of the Downtown Core, where the rate increased to 11.2% q-oq from 11.9%.
“Retailers remained cautious after multiple government measures that disrupted their business but they were more willing take calculated risks and to commit to leases when the rent level was attractive, and landlord support was assured should it turn difficult due to an extension of or another tightening Covid-related measures,” Angelia Phua at JLL, is the consulting director, research, and consultancy, Singapore.
A slower increase in retail space stock supported the lower vacancy rate. This was compared to an increase of 18,000 sq.m in the previous quarter.
Leonard Tay, Head of Research at Knight Frank Singapore, says that consumers are turning to new activities and new places in Singapore to escape the daily grind of the pandemic. This has driven demand for more retail experiences.
“As such the stock of retail space increased 75,347 sqft [7,000 square m] during the third quarter. However, the amount of occupied space increased by 355,209 sqft [33,000 m] compared to growth of 150,695 sqft[14,000 sq. m] in Q2 2021. He explains that Decathlon and Don Don Donki, two of the largest retailers, have continued to grow despite the pandemic.
After three quarters of declining retail property prices, they remained the same after remaining stable. Shirley Wong, Colliers’ director of research in Singapore, notes that property prices declined marginally by 0.5% qo-q. “Performance was again dragged lower by the Central Area,” Shirley Wong said.
Consultants predict that rents will remain low in 4Q2021 due to the Covid-19 policies. Phua says that the recent extension of safe-management measures for four weeks is expected to temporarily dampen retailers’ confidence and lead to rents succumbing in the short-term.
Consultants believe that there is a possibility of a rebound for the retail sector, given the establishment and expansion of vaccinated travel lanes in Singapore, as well as the transition to Covid-19 which is endemic in Singapore, however. Tay says that if restrictions are removed by November and more vaccinated travelers lanes are established, rental declines could slow down. The sector is poised for a gradual recovery by 2022.
At the end of 3Q2021, the total supply of retail space was 428,000 sq.m. This is compared to 419,000 sq.m. in the previous quarter.