Average retail rents declined 2.4% in first half of 2021

Colliers International’s research shows that average retail rents declined 2.4% in the first half of 2021 in Singapore

• Average retail rents declined 2.4% in H1 2021 in Singapore.
• Islandwide net absorption turned positive in H1 2021 from -280,000 sq ft in H2 2020.  
• Average retail rents to decline 1.8% in 2021 as higher vaccination rates may allow for a potential easing of restrictions towards the end of the year. 
• Ground-floor rents on Orchard Road declined 2.7% HOH in H1 2021 to SGD36.24 per sq foot, while that of Regional Centres only declined 2.0% HOH to SGD31.05 per sq foot. 
• Total retail transaction volumes declined 78.3% HOH to SGD564 million.

Colliers International on 11 August published its research reports which examine the market performance of the retail property sector in the first half of 2021 (H1 2021) and its projections for the industry.

Based on Colliers’ Research, average retail rents declined 2.4% in H1 2021 overall despite net absorption turning positive from -280,000sq ft as landlords prioritised occupancy over rents.

“We can expect average retail rents’ to decline 1.8% in 2021 as higher vaccination rates could allow for a potential easing of restrictions towards the end of the year”, said Ms June Chua, Collier International’s Executive Director, Head of Tenant Representation, said.

“Overall, we can also expect a positive net absorption in 2021 as the economy recovers while supply remains muted.”

Colliers’ Research’s data shows that ground-floor rents on Orchard Road declined 2.7% HOH in H1 2021 to SGD36.24 per sq foot, while that of Regional Centres only declined 2.0% HOH to SGD31.05 per sq foot, impacted by the Phase 2 (Heightened Alert) tighter restrictions of prohibited dine-in, and lower mall occupancy limits and permissible group size.

Meanwhile, the crisis has accelerated the ongoing recalibration of the retail industry. “With the exit of several unsuccessful brands, opportunities were created for new brands to enter the market via concept and flagship, as part of their omnichannel distribution network. Meanwhile, landlords are pushed to reconsider their tenant optimisation, asset repositioning and placemaking strategies in response to changes in the retail industry,” said Jonathan Denis-Jacob, Director, Head of Advisory & Consulting at Colliers.

“Some great examples are Honey’s Bar opening its first store in Jurong Point, BTS pop-up store launching at Funan after its earlier success at Plaza Singapura, Flash Coffee expanding its operations in Asia by adding 300 new outlets by the end of 2021, and jewellery group Malabar targeting to open 16 overseas outlets including Singapore by Q1 2022. Further, The Shoppes at Marina Bay Sands, which has welcomed about 20 new stores since June 2020, saw its occupancy recovering to 99% in Q1 2021.”

That said, total retail transaction volumes declined 78.3% HOH to SGD564 million from a high base due to Frasers Centrepoint Trust (FCT) ‘s purchase in H2 2020 of the remaining 63.1% stake in the Asia Retail Fund, which owns five suburban retail malls in Singapore as part of its portfolio.

Mr Steven Tan, Colliers International’s Executive Director of Investment Services at Colliers, commented: “There were a few notable deals in H1 2021, including the divestment of YewTee Point by Frasers Centrepoint Trust, and Low Keng Huat’s acquisition of a 45% stake in Paya Lebar Square in a stake swap deal with Sun Venture.”

Mr Paul Ho, chief officer at iCompareLoan, said: “Going forward, I expect the average retail rents to stabilise. It is a good time for investors to calculate if they can afford to buy such properties.”

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