SINGAPORE: Average monthly first-storey rent across the island declined by 1.2 per cent in the first quarter of 2016 compared to the previous quarter, to about S$30.15 per sq ft, said DTZ Southeast Asia.
This makes the fourth consecutive quarter of decline since Q2 2015, said DTZ in a report released on Tuesday (April 5).
Compared to a year ago, prime retail rents in Q1 were 7 per cent lower.
This was largely due to weaker demand in 2015, which saw islandwide occupancy rate falling by 1.6 percentage points year-on-year to 91.9 per cent.
Retail rents in Orchard/Scotts Road continued to encounter headwinds, as average monthly first-storey rents there dropped 1 per cent to about S$37.65 per sq ft in Q1, said DTZ.
According to the latest URA statistics, occupancy rate in the area fell by 2.1 percentage points y-o-y to 92.3 per cent in 2015, the lowest since 1996.
DTZ said that although visitor arrivals, which form the bulk of shoppers in the prime shopping district, inched up 0.9 per cent y-o-y in 2015, much of the increase was because of the low base in 2014 that resulted from aviation disasters.
Compared to 2013 – a more representative year – visitor arrivals actually declined by 2.2 per cent in 2015, DTZ noted.
Retailers in Orchard/Scotts Road face competition from neighbouring places such as Bangkok, South Korea and Taiwan, which possess distinctive cultures and offer affordable shopping, said DTZ. Cheaper airfares leading to higher mobility throughout the region, in conjunction with a relatively strong Singapore dollar that made shopping here more expensive, also contributed to weaker retail sales, it added.
In the other city areas, average monthly first-storey rents declined by 2 per cent q-o-q to S$21.35 per sq ft in Q1.
Apart from weaker business sentiment, their rents were also pressured by the relatively large impending supply in 2016. Mixed-use projects slated to complete in the area include OUE Downtown Gallery (177,000 sq ft), Tanjong Pagar Centre (139,000 sq ft) and Duo Galleria (56,000 sq ft).
Average monthly first-storey rent in the suburban areas fell by 1 per cent q-o-q to about S$31.40 per sq ft in Q1.
DTZ said it expected more outlet consolidations amid rising operating costs and weaker in-store sales. Brands that have recently closed shop in Singapore include furniture retailer iwannagohome, and F&B establishment Smoothie King.
Ms Anna Lee, DTZ Southeast Asia’s director of retail, added: “With competition from e-commerce coming at full force, retailers are placing greater emphasis on providing highly personalised services. Many retailers have recently undergone revamps to include private rooms and lounge areas, which are fitted with superior furnishings. Not only do these encourage shoppers to patronise the physical outlet, it also gives shoppers a sense of exclusivity.”
An example, she said, is the newly opened Tiffany & Co outlet at Ion Orchard. Apart from being the brand’s first street-facing store in Singapore, the two-storey outlet also showcases a private viewing space with custom furnishings. Dior also revamped its store at Ion Orchard to include luxuriously-fitted lounge areas. A personal stylist is also present at its store to provide shoppers with fashion advice.
