Suntec REIT under threat from low occupancy rate, soft rents at Suntec City Mall Phase 3

The mall is not delivering as promised.

Suntec REIT is in for a disappointment if it had hoped that costly asset enhancement initiatives at Suntec City Mall Phase 3 will drive much-needed growth.

Analysts noted that low occupancy rates and soft retail rents are bugging Suntec City Mall Phase 3, which received its temporary occupation permit (TOP) in February this year.

“Despite the fact that Phase 3 will be opening soon, the committed occupancy rate stands at ~80%, although this is an improvement from the 70.5% figure recorded at end-2014. Leasing momentum has been sluggish, in our view,” stated Andy Wong of OCBC.

Xuan Tan of CIMB added that the overall committed passing rent of the entire mall stands at $12.15psf per month, lower than the S$12.59psf/mth of Phases 1 and 2.

“We understand that the remaining ~20% of space at Phase 3 is predominantly prime level 1 space, but remain cautious on the achievable rents given the muted retail outlook. Management cited the challenges faced by retailers as the key reasons for the slower take-up rate and softer rents, and its main focus will be on getting the right tenant mix,” Tan noted.