Substantial slowdown: Retail occupancy rate hits 3-year low in Q2

Cautious retailers are wary about expansion.

Singapore’s retail occupancy rate hit its lowest level since 1Q2011 in the second quarter of this year, on the back of a marked growth slowdown as retailers become more cautious in their expansion plans.

According to Knight Frank, occupancy rate in all areas fell in 2Q 2014, with the exception of Outside Central Region, where occupancy rates stayed firm at 96.6 per cent, and Orchard Road, which saw a 0.4 per cent q-o-q increase to 92.6 per cent.

Orchard Road occupancy rate saw a significant decline of 3.2 per cent q-o-q in 1Q 2014 with the completion of Orchard Gateway adding to the stock. Occupancy rates at Orchard area can be expected to rise as tenants move into the newly-completed mall.

The largest decline in occupancy was seen in Downtown Core, falling 1.2 per cent q-o-q. This could be due to the recent completions of various Asset Enhancements Initiatives in the area, with tenants not fully moved in yet.

According to Knight Frank, “Retailers are also more cautious in their expansion plans, and typically go into ‘tried and tested’ areas and in well-established malls to enhance their revenue. The consolidation of operations to more prime, well-managed malls could have led to the continued strong rental performance, while at the same time leaving less prime spaces more susceptible to higher vacancy.”