Shopping mall rents to slide further over next year: Report

SINGAPORE — Rents at shopping malls in Singapore fell in the first quarter and will likely decline further over the next 12 months, hurt by falling visitor arrivals and weak retail sales, property consultancy Cushman & Wakefield said in a research report.

Cushman said the biggest drop occurred at malls on the city fringe, such as the City Hall and Marina Centre areas, where rents fell 1.3 per cent from the previous quarter to S$23.68 per square foot per month.

Rents of prime retail space in the Orchard Road shopping belt slipped 0.8 per cent from the previous quarter to S$38.20 psf per month, while rents for prime retail space in suburban locations eased a marginal 0.5 per cent to S$31.85 psf per month.

“Unlike the city fringe submarket, Orchard Road is still highly sought after by international retailers looking to open their first or flagship stores. Thus, rents of major retail malls in Orchard Road have held relatively firm even though economic indicators are signalling a down market,” Cushman said.

Meanwhile, suburban malls experienced the smallest drop in rents, as businesses remained well supported by heartland demand.

Looking ahead, Cushman said this year will be a challenging one for retailers as tourist spending is expected to fall due to a slowdown in visitor arrivals while household spending may be undermined by weaker consumer confidence.

“Consolidation of space among various trades has been more evident since the start of 2015. Fashion apparel and accessories brand Lowrys Farm exited the market earlier this year, while other tenants such as Marks & Spencer and Cold Storage in Centrepoint, John Little stores at Marina Square and Tiong Bahru Plaza, and Japanese department store Isetan at Wisma Atria are expected to cease operations by the second quarter of 2015,” Cushman said.

Lifebrandz is also expected to pull five nightspots from The Cannery at Clarke Quay, surrendering a total of 57,000 square feet of space, it added.

Space consolidation is likely to continue, particularly for retailers which expanded aggressively during the boom time but have started to experience rising business costs, the property consultancy said.

In an interview with TODAY last month, Mr Kesri Kapur, the regional head of Al-Futtaim Group, which manages brands such as Marks & Spencer and John Little, said the bricks-and-mortar retail sector here faced challenges including a shortage of manpower and changing consumer habits.

An increasing number of shoppers, especially the younger people, are buying online, he said, adding that consumers are now more knowledgeable and make purchases only after conducting research and comparing products.