The shops are shrinking: Retailers forced to move to smaller shops as rents rise in Q2

Rents inched up 0.6% in Q2.

Shops are shrinking The country’s retailers are moving into smaller shops as rents continue to inch up in Singapore’s prime shopping districts.

According to Knight Frank, overall retail space rentals in the Central Region rose 0.6 per cent q-o-q in 2Q 2014. This comes after a 0.3 per cent q-o-q decline in 1Q 2014.

On a half-yearly basis, retail rents in the Central Region have increased by 0.3 per cent in 1H 2014.

“The more upbeat performance this quarter was attributed to enhanced rental performance in both Central Area and Fringe Area rentals, which saw the indices rise by 0.5 per cent and 0.8 per cent q-o-q respectively,” stated Alice Tan, Director & Head of Research at Knight Frank Singapore.

Here’s more from Knight Frank:

The URA Retail Space Rental Index for the Fringe Area has risen 3.2 per cent year-on-year (y-o-y). This improvement in performance comes after the Fringe Area saw a decline of 1.2 per cent y-o-y in the same period last year.

Retailers are increasingly going for smaller shop sizes and to manage their shop space more efficiently, as they seek to manage both rental and manpower costs. The smaller shop sizes could be responsible for the buoyant rents on a per square foot basis.

At the same time, 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.