2.5M sqft of suburban retail space to flood market

Maybank Kim Eng projects an "onslaught" of suburban retail supply with 0.5M sqft coming in 2012 and almost 2M sqft in 2013.

This marks a significant shift in supply away from Orchard Road to the suburban areas, according to the brokerage firm, a flood of stock that "will still be relatively well-absorbed by the incoming demand."

Here's more from Maybank Kim Eng:

Suburban retail supply to dominate. Looking ahead, we project that there will be an additional supply of 0.5m sq ft in 2012, before the next onslaught of almost 2m sq ft in 2013. Unlike the situation in 2009, where the focus was on the Orchard road stock, most of the supply this time round will come from the suburban micro-market: approximately 1.7m sq ft from suburban areas and 0.5m sq ft from Orchard Road in 2012–2013.

Orchard Road retail micromarket. We are expecting tourist arrivals to grow at a CAGR of 5.2% over 2011–2015, reaching 16.2m arrivals by 2015. We believe that the increase in the tourist arrivals will provide some form of price support for Orchard rentals, especially since there is no more known supply after 2013. We believe that orchard retail demand will grow at a CAGR of 2.8%, outstripping overall supply increases (CAGR: 2.4%) for 2011–2015. This will cause vacancy rates to dip from 5.4% in 2011 to 4% in 2015. We also expect orchard rentals to register per annum growth of 0–3.5% in 2012–15 (CAGR of 2.2% over 2011–2015), as concerns on the supply overhang are removed.

Suburban retail micromarket. According to our forecasts, the suburban private sector retail supply will grow at a CAGR of 10.6% over 2011–2015, thus slightly exceeding the demand CAGR of 10.1%. This will in turn cause vacancy rates to rise from 3.9% in 2011 to 5.7–5.9% in 2014–2015. However, looking at the approximately 40.7k new private homes (incl. ECs) that were sold in the Outside Central Region in 2009–YTD 2012 and the bumper HDB launch of 50,000 BTO flats in 2011–2012, we think that the suburban stock will still be relatively well-absorbed by the incoming demand (except for some geographic precincts, such as Jurong, which may be tight in the initial years after completion). Our retail floor space per capita computation (Figure 12) substantiates our position. We estimate that suburban rentals will continue to grow at a CAGR of 1.95% in 2011–2015.