Non-prime location vacancies to rise in H2

This comes as tenants will not be able to operate at full capacity which may lead to shutdowns.

Vacancies in non-prime locations are expected to rise in the second half of 2020, according to a Cushman & Wakefield report.

This comes as many activity-based tenants such as food and beverage (F&B) as well as health and wellness will not be able to operate at full capacity, which could lead to many businesses shuttering for good.

Prime retail rents fell across the board Q2, with other city areas rents falling 3.5% QoQ or $20.88 psf/mo. Orchard and Suburban prime rents also fell 1.5% and 0.9% QoQ respectively.

Cushman & Wakefield head of research in Singapore and Southeast Asia Christine Li said that the entire retail market may see steeper falls in rent in H2 due to higher expected vacancies, lower footfalls, social distancing measures and economic uncertainties.

“However, for popular prime spaces in sought-after suburban malls which are able to maintain high occupancy levels due to their strong tenant profile, rents will be less affected,” she adds.

Cushman & Wakefield expects prime rents in Orchard and Other City Area to fall by about 10% each and suburban prime rents to fall by 5% for the whole year.

The market also expects more vacant spaces in non-prime locations coming into the market in H2 as activity-based tenants are usually located in non-prime spaces within the mall due to their larger size requirements. Furthermore, there could be an overall fall in new demand for retail spaces as some F&B tenants explore delivery options, such as cloud kitchens or central kitchens, due to current social distancing measures.

Cushman & Wakefield executive director in regional tenant representation Mark Lampard said that there is some opportunity for retailers to pursue prime retail spaces during this time as vacancies rise and to sharpen their e-commerce channels including virtual live sales. Alternatively, they could also explore suburban prime options for more stability.

During the quarter, indoor family attraction Kidzania Singapore announced its closure along with German-themed Starker Bistro closing all seven of its outlets in Singapore. Esprit also reportedly closed 12 outlets islandwide, whilst Robinsons will close its Jem outlet in August this year. DFS closed its store at Changi Airport’s 4 terminals, making way for another operator, Lotte, to take over and Isetan will not renew its lease at Westgate.

Nevertheless, some mall operators are able to re-invent space to secure some interesting replacement tenants. JEM was able to re-configure its layout to accommodate IKEA’s first concept store, which will replace the space left by Robinsons. The concept store will open next year.