Retail space rents grew 2.3% in Q4 2019

Even with a quarterly increase, a rental gap could emerge as landlords shake up tenant priorities.

Rents for retail space jumped 2.3% in Q4 2019 following the same increase of 2.3% in the previous quarter, according to a report by Urban Redevelopment Authority (URA).

Prices of retail space increased by 1.8% in Q4, bringing prices to register a 1.3% growth for the whole year of 2019.

In terms of supply, retail spaces ended with a total supply of 333,000 sqm gross floor area (GFA) in Q4. The previous quarter recorded a relatively lower supply of 288,000 sqm GFA.

The amount of occupied retail space increased by 26,000 sqm, compared to the increase of 29,000 sqm in the previous quarter.

Meanwhile, the stock of retail space expanded by 29,000 sqm in Q4, higher than Q3’s growth of 16,000 sqm. As the changes in occupied retail space and stock of retail space were similar, the island-wide vacancy rate of retail space remained at 7.5% at the end of the fourth quarter, noted the report.

Knight Frank’s head of retail Angela Hoe believes that whilst the increase in retail rents is sighted to continue due to the retained interest for such spaces, the rental gap between landlords and tenants remain wide for units in non-prime locations within malls.”

Cushman and Wakefield’s head of research Christine Li lends a similar analysis.

“The retail operating environment remains challenging and its outlook mixed. Landlords are still experimenting with concepts which work best while investing in experiences and authenticity that consumers can’t get online. They are increasingly focused on tenants’ retail concepts rather than their ability to pay the highest rent,” said Li.

With regards to supply, Li believes that new retail supply is expected to stay low over the next five years.

“Incoming retail supply in 2020 is expected to remain relatively low with only 73,000 square metres (sqm) of retail space expected to be completed, which is less than half of the supply of 170,150 sqm in 2019,” noted Li.