Chart of the Day: Check out retail REITs’ plummeting footfall and sales

Is it an early sign or a false alarm?

Retailers are seeing fewer customers frequenting their malls as Singapore’s retail real estate investment trusts (REITs) registered low, if not negative, growth in footfall and sales in 2Q16.

But is it a sign of darker things to come? Analysts from OCBC say while it is too early to conclude that this could spark further weakness going forward.

“We see challenges in Orchard road focused malls given the 11.3% yo-y increase in visitor arrivals has not appeared to spur spending for malls like (Vivocity and Wisma Atria and Paragon),” a report by OCBC noted.

According to the report, DPU growths fell to low single digits, while occupancy rate was still above 90% but there was greater dispersion between retail malls.

“The higher vacancy rates seen across selected malls (especially in Central Singapore) may provide more bargaining power to tenants, hence we expect flat to low rental reversions, as Managers aim for tenant retention,” the report added.

To deal with the problem, the report noted that managers have been utilising the soft environment as an opportunity to refresh their offerings by introducing some new brands and concepts.

“Major developments have also taken off, for instance, AEI works at Northpoint (FCT) commenced in March, and the redevelopment of Funan started in July,” the report added.