Rise in retail sector rents after many quarters of decline

Rents in the retail sector have been flailing for the last few quarters. Retail rents in the central region have taken the hit especially hard with 12 consecutive quarters of declining prices.

But things may finally be looking up as retail rents in the central region rose last quarter.

Heeren, Orchard. Picture: iProperty

Retail rents in the central region rose 0.1% in Q1

This is the first increase after 12 consecutive quarters of decline though vacancy rates remained unchanged. The previous saw an increase of 64,000 sq m in the net lettable area (NLA). The margin of increase in retail space stock rose by just 11,000 sq m last quarter and vacancy rate increased by 7.5%. In the previous quarter, the figure was at 7.4%.

Retail spaces on prime floors in shopping malls will continue to remain sought-after though corridor units in secondary floors may find it harder to find tenants. The increase in retail space supply may slow in the next few years, which could help stabilize the market. Demand may rise to a level that equalizes itself with supply.

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313 Somerset. Picture: iProperty

Is retail rental market bottoming out soon?

Property analysts have a couple of expectations for the retail rental market:

  • A possible bottoming-out of this segment soon though no sharp rebounds predicted
  • Market stabilization and sustainable growth in the mid to long-term

Suburban malls are popular with retailers as the shopper catchment and footfall in these remain high. The office market, on the other hand, is finding ready tenants with the third consecutive rise since it bottomed-out in 2017. Office rents are expected to rise till the next entry of a large batch of office spaces in 2020.