There’s room for more: Limited retail space made vacancy rate reach 5.8% in Q2

Supply, demand and vacancy rate 

According to the URA, only 38,000 sq ft of retail space was completed in Q2. The largest supply came from the new Orchid Hotel’s retail units in the Tanjong Pagar area measuring some 24,000 sq ft. Others were smallish ancillary retail spaces in residential or commercial buildings. The island-wide vacancy rate has been stable this year due to limited supply. The vacancy rate improved from 6.1% in Q1 to 5.8% in Q2. The suburban segment saw the biggest fall of 0.9 percentage points while Orchard Road fell 0.4 percentage points.

Future supply

There will be approximately 7.0 million sq ft of future supply as of the end of Q2/2011. A signifi cant 1.6 million sq ft is expected to enter the market in 2013, including the redeveloped Specialists’ Shopping Centre, Hotel Phoenix and Orchard Emerald, the refurbished Chinatown Point, and Lend Lease’s Jem at Jurong East. CapitaLand’s mall on the site next to Jem could also open its doors in 2013, although the site was acquired nearly one year after the Jem site. The second half of 2011 could see around 1.1 million sq ft of retail space being completed. This includes 112 Katong, Alexandra Retail Centre, Changi City Point and Scotts Square.

Rental values

The URA rental index for central areas posted a minimal increase of 0.7% in Q2 after a 0.4% gain in the preceding quarter. The index is now 5.6% off the last peak in Q2/2008. The average base rents for good-quality space on Orchard Road held fi rm at S$34.4 per sq ft per month in Q2/2011, although ground-fl oor space at very prime malls could command almost twice the rate.