2 reasons why everyone should be cautious on retail property market this year

Retail sales have been sluggish.

Despite the retail REITs’ outperformance YTD, the outlook for the overall retail property market in Singapore this year remains cautious principally because of 1) sluggish retail sales; and 2) significant new supply of retail space scheduled for completion in 2014.

Here's more:

Sluggish retail sales
Excluding motor vehicle sales, retail sales in Singapore grew an average 1.3% in 2013, compared to theaverage 2.7% growth in 2012.

Similarly, food and beverage (F&B) sales grew an average 2.1% in 2013, which was slower than the average 4.6% growth registered the year before.

In terms of shopper traffic, it appears the malls outside the prime Orchard Road shopping belt are doing better than the ones inside. Shopper traffic at CMT’s portfolio and Clementi Mall grew 3.1% and 9.3%, respectively, in 2013.

On the other hand, traffic at Wisma Atria declined 4.9%, while traffic at Paragon was up just 0.6% in 2013.

Significant new supply of retail space in 2014
Jones Lang LaSalle’s (JLL) latest forecast suggests some 2.6mn sq ft of new retail space is expected to be completed in Singapore during 2014, of which just under 1.8mn sq ft is expected to be located in the suburban shopping area. 2014 could therefore see the highest increase in retail space in Singapore since 2009.

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