Retail rents tipped to fall up to 15% in 2020

Rental gap between suburban malls and in Orchard will continue to narrow.

Retail rents in Singapore are tipped to decline 10%-15% for the whole of 2020 as recessionary pressures persist and safe distancing restrictions are still in place, according to a report from Knight Frank.

The report noted that as physical retail stores resumed operations, shopper traffic also returned to a greater extent in suburban malls compared to the centrally located ones that are more reliant on the tourist dollar.

Meanwhile, the rental gap between suburban malls and those in Orchard Road is expected to continue narrowing, with rentals of retailers in the surburban regions expected to decline by not more than 7.5% for the whole of the year.

As tourist inflow remains impeded by travel restrictions, the domestic catchment resident population will be able to support a speedier recovery for the suburban malls in comparison.

Amidst increased activity in the retail sector, Knight Frank expects a bottoming out of rentals by end 2020 or early 2021.

Retail sales in August fell 9% YoY, the 19th consecutive MoM decrease in the index. However, the fall in August was less severe than the previous months since the onset of the circuit breaker.

Meanwhile, social distancing measures and border controls have led to island-wide prime retail rents dropping 10.3% YoY to average $20.18 (S$27.40) psf per month in Q3. This was largely led by a 11% decline in Orchard as retailers continued to struggle with the lack of tourists.

In contrast, average prime retail rents in the surburban region started to stabilise, recording the least decline of 6.9% YoY amongst the various micromarkets, averaging $19.59 (S$26.60) psf pm.

"As more employees worked from home, the malls located within residential population centres were visited by many for daily necessities and household sundries," the report added.