Rental rates for mid-range retail space likely to fall

Source : Channel NewsAsia - 3 Nov 2008

Mid-range retail spaces in Singapore are likely to see a fall in rental rates, due to a drop in tourist arrivals and slowing domestic spending.

Properties which are having rental rates renegotiated in the midst of the current economic downturn are likely to be the most vulnerable. Experts said landlords will have to rent out their spaces for less as retailers are hit by lower earnings.

Eugene Lim, associate director, ERA Asia Pacific, said: “For the whole of this year, we will probably see a 5 per cent increase for the retail sector in terms of rent. Next year, quite possibly, we will see less increases and the market will probably be flat for coming quarters.”

But rents for high-end properties in prime shopping belts like Orchard Road, as well as low-end suburban mall space, are expected to be more resilient.

High-end tenants, such as luxury goods boutiques, would resist giving up top locations and are likely to be willing to pay more. Tenants in lower-end properties traditionally sell basic necessities which are still in demand, despite the economic slowdown.

Suburban malls also face the least pressure from new retail space supply next year. Only 20 per cent of the new retail space is in suburban locations. The remaining 80 per cent is located in the city centre.