Chart of the Day: Retail rents to remain on a dismal standstill in 2015

Investor demand for strata-titled shops and F&B space will still be anaemic.

As the positive interest from retail occupiers to set up shop or expand is expected to be matched by retailers’ resistance to further cost increases in a challenging operating environment, the standstill in retail rents is forecast to continue into 2015.

According to a report by Colliers International, while newly emerging non-mall retail options in varied and diverse locations might be characterised by moderate rent increases, those in traditional malls are likely to continue to experience fairly stable rents in the year ahead. Rental growth for prime ground floor retail space in the Orchard Road district is forecast to range between -1% and 1% in 2015, while that in the Suburban Areas/Regional Centres could plateau at between 0% and 2% in 2015.

Colliers International adds that even though investor demand for strata-titled shops and F&B space (including mixed-use developments) is likely to remain anaemic due to the continued effects of the TDSR and the spectre of rising interest rates in 2015, unit owners are expected to hold onto their price expectations as such units remain rentable. The growth outlook for 2015 appears to be muted with the average capital values of prime strata-titled retail space in both Orchard Road and the Regional Centres expected to remain generally flat for most of the year.