Chart of the Day: Strata-titled retail space still haunted by TDSR framework woes

Trend is likely to tread sideways.

According to Colliers International, given the cautious sentiment evident in the first half of 2014, as well as retail operators’ resistance to rental increases in a highly challenging and competitive trading environment, retail rents remained generally unchanged in 2Q 2014. 

Here's more from Colliers International:

The average monthly gross rent of prime retail space in the Regional Centres gained a slight 0.3% from the preceding quarter’s level of $33.50 per sq ft to $33.61 per sq ft by the end of June 2013.

During the same period, the monthly gross rents for prime retail space in Orchard Road moved in the opposite direction, correcting by 0.2% from the $36.50 per sq ft recorded three months ago, to $36.42 per sq ft in 2Q 2014.

As a result, the rental premium that prime retail space in Orchard Road commands over similar space in the Regional Centres narrowed further from 9.0% as of the end of March 2014, to 8.4% as of 2Q 2014.

Taking into account the combination of the inherent strengths of the retail sector and Singapore’s overall attractiveness together with the struggles that retail and F&B businesses face in an increasingly competitive and demanding operating environment, retail rents are not expected to change substantially for the rest of 2014 with general occupancy levels expected to be fairly stable.

In Orchard Road, the growth in the average monthly gross rent for prime ground floor retail space should remain within a range of -1% to 2%, while the popular Regional Centres could exhibit comparatively better rental growth of between 1% and 3%, in 2014.

Likewise, activity in the strata-titled retail space market (including those in mixed-use developments) is unlikely to improve significantly as it remains spooked by the TDSR framework. As a result, capital values are expected to continue to trend sideways in the second half of the year, as it did in the first half.