The worst of oversupply is finally over.
There are better days ahead for struggling retail REITs in 2015. Retail landlords were hit by wave after wave of negative news last year, from a spike space supply to a sharp tourist arrival slowdown to the spillover of spending into online channels.
According to CIMB, the worst is finally over for these retail REITs. For one, space supply is expected to moderate this year peaking in 2014. Around 2.6m square feet of space flooded the market last year, more than twice the 3 -year historical average net take-up of 1.1m sq ft.
“We expect supply to moderate, averaging about 700k sq ft annually in 2015-2018. Additionally, we believe Singapore is not “over-malled” vs. other Asian cities and historically,” stated CIMB.
Retailers are also learning to work around the two issues surrounding the demand for retail space, namely e-commerce and labour shortage.
“Retailers have streamlined their operations and increased productivity through technology. Landlords are also actively engaging in asset enhancement initiatives (AEIs) and tenant remixing,” noted the report.
Demand for retail space is expected to stay healthy this year, which should give retail REITs a much-needed breather.
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