Retail sector rental woes will extend until 2021

Rental growth from 2017 to 2021 is expected to hit 0.7% in prime spots.

The bleak rentals for Singapore's retail sector are expected to remain weak until 2021, Deutsche Asset Management revealed.

According to its mid-year Asia Pacific Real Estate Strategic Outlook, retail rents have declined in Singapore, and retailers face margin pressures from the combined challenges of weaker retail spending and labour costs.

Rental growth from 2017 to 2021 is expected to hit 0.7% in prime Singapore and 0.6% in suburban Singapore.

According to Deutsche Asset Management, the rents are affected by diminished tourist spending.

Meanwhile, excess returns in suburban Singapore are expected to reach 2.7%, whilst those in prime Singapore are expected to hit only 1.9%.

Compared to "healthy" excess returns of 3-5% expected in most key retail markets in the region, Singapore's figures remain weak.

However, prime suburban malls are likely to show more resilience, because of stable local non-discretionary spending.

The $2.2b investment in Jurong Point Mall led the 50% growth of investment volumes in the first half of 2017.