Suburban market to boom in retail sector
Rental units will continually rise at a compound annual growth rate of 1.95% in 2011–2015.
According to Maybank Kim Eng, Singapore’s retail sector has proven to be more resilient and less volatile than the office sector. For the past 15 years, the vacancy rates of the retail sector islandwide have ranged from 6% to 10%, with incremental demand matching incremental supply, on average.
Here's more from Maybank Kim Eng:
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.
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. We estimate that suburban rentals will continue to grow at a CAGR of 1.95% in 2011–2015.