Potential investors snub Singapore retail assets amid intensifying labor crunch

Retail rents will continue to languish.

Manpower shortage and increasing operation costs are keeping potential investors from snapping up retail assets in the country, as unfavorable local conditions continue to dampen retailers’ growth plans.

A report released today by CBRE revealed that Singapore is trailing behind other countries in the region when it comes to investment demand for retail assets. Australia and Japan recorded strong investment demand from international retailers, while Singapore and Greater China languished in the sidelines.

“The retail sector in Singapore continues to be hampered by the ongoing labour shortage. The Ministry of Manpower recently tightened the ratio of two foreign hires to every three locals, a move that will further inhibit retailer expansion. This, combined with weak consumption, is affecting investment appetite for retail assets.

“Rental growth over the remainder of the year will be led by Japan, Australia, and emerging markets in Southeast Asia. Subdues demand in China, Hong Kong and Singapore will depress rental growth and increase yield decompression pressure,” CBRE noted.

Meanwhile, a report by Savills showed that prime retail rents on Orchard Road continued to stay flat at $34.6 per sq ft per month in the third quarter. Prime suburban rents have also languished at $31.1 per sq ft per month. 

“Rents are less likely to increase as slower retail sales and high operation costs cap rental growth,” stated Savills.