CNA : Retail rents expected to rise in second half of 2010

Retail rents expected to rise in second half of 2010
By Millet Enriquez | Posted: 22 March 2010 1215 hrs

SINGAPORE : Retail rents across Singapore were steady for the first quarter of 2010, according to estimates by DTZ Research.

But analysts said retail rents could rise moderately in the second half because of improving economic conditions.

Shoppers and tourists are boosting retail sales, helping rents hold firm in the first quarter.

Gross rentals for prime first-storey space at Orchard and Scotts Road stayed at S$39.70 per square foot per month, while upper-storey retail space went for S$20.50 per square foot a month.

Gross rents of prime first-storey retail space in other city areas remained at S$24.40 per square foot per month, while upper-storey retail space in the same areas fetched rents of S$14.00 per square foot per month.

In the suburban malls, monthly gross rents for first-floor prime space were S$33.50 per square foot and those on the upper floors cost S$22.80 per square foot.

Chua Chor Hoon, Head of Southeast Asia Research, DTZ Debenham Tie Leung, said: "If the economy in Singapore and those around us continue to do well, definitely it will boost consumer confidence even more later on in the year, and that will have an impact on retail sales...So on the whole, the outlook will be more positive. We expect rent to grow moderately this year between 2 to 5 per cent this year."

Despite the rosy outlook, some analysts said landlords are facing resistance on increases in rents.

Tenants may also hold out for lower rents, with new retail space coming up this year.

Three developments with over 1.1 million square feet of net lettable area are expected by the end of this year.

Analysts expect Orchard Road vacancies to rise as tenants move to new malls.

Barring another economic crisis, observers said rising inflation and interest rates could also hurt retailers.

Ms Chua said: "The suburban malls will be more resilient compared to the Orchard Road and city malls. That is because there is a fundamental local catchment around the suburban malls, and the suburban retailers provide more basic goods and services to serve this local catchment."

Leasing demand is also expected to be modest in the coming months, as most retailers completed their relocation and expansion plans last year. - CNA/sc/ms