Why Singapore malls are expected to post surprises over next 2 years

Is it due to rising tourism?

According to CIMB, labour costs continue to be the key grouse among Retail REITs, particularly the tenants who are thinking of expanding and/or those in the service sector (for example, F&B).

These tenant groups are increasingly relying on technology and innovative methods, such as taking orders on PDAs, to save on labour costs.

Here's more from CIMB:

Rental reversions. In 3QCY13, the Singaporean retail REITs continued to achieve stable rental reversions (on the back of growing tenant’s sales ranging 2.5% -20%) in the range of 6.1-7.5% yoy – which translates to an average of 2.0-2.5% per annum (with the exception of VivoCity that achieved an impressive 38.7% yoy).

This level, which is consistent with the historical average are deemed to be sustainable (management of MCT has guided rental growth to slow down).

Going forward, prime retail malls, which act as a proxy to tourism growth in Singapore, may post positive surprises if visitor arrivals number surpass the forecasted CAGR of 4.7% over the next two years; on the back of global economy recovery and rising number of MICE.

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