Chart of the Day: Retail landlords scratch their heads as mall occupancies plummet

Occupancies dipped below the 90% level.

An unfortunate brew of increased retail space, rising operating costs, and the rapid rise of online retail channels kept the retail environment challenging as empty mall spaces multiply.

As a result, a report from UOB Kay Hian said retail landlords have been guiding for a moderation in rent reversions as they tailor their mall mix to favour more experiential based tenants.

Meanwhile, if there’s a firm that could weather the current environment, it’s Starhill Global, UOB Kay Hian said, with its diversification across geographies and asset classes.

“In an otherwise lacklustre sector, with its diversification across geographies and asset classes. 1Q16 saw overseas assets comprise 38.3% of gross revenue. Bearing in mind the lack of office supply in Orchard, the office component (100% occupied) contributes 13.7% to gross revenue,” UOB Kay Hian said.

On the other hand, increased retail space, rising labour costs and threat from alternative retail channels have in part prompted retail landlords CapitaLand Mall Trust (CMT) and Frasers Centrepoint Trust (FCT) to guide for a moderation in rental reversions, added UOB Kay Hian.