Although most retail businesses in Singapore have resumed operations since 19th June 2020, social distancing measures remain in place after a two-month circuit breaker. Many activity-based tenants such as F&B and health & wellness will not be able to operate at full capacity, which could lead to many businesses shuttering for good. As a result, vacancies in non-prime locations are expected to rise in the second half of 2020.
Prime retail rents fell across the board in the second quarter of 2020, with Other City Areas rents ($20.88 psf/mo) falling the most at -3.5 per cent quarter-on-quarter. Orchard ($34.73 psf/mo) and Suburban ($31.56 psf/mo) prime rents fell -1.5 per cent and -0.9 per cent quarter-on-quarter respectively.
Christine Li, Head of Research, Singapore and Southeast Asia said “The entire retail market may see steeper falls in rent in H2 2020 due to higher expected vacancies, lower footfalls, social distancing measures and economic uncertainties due to Covid-19. Currently, many landlords are still maintaining close to pre-Covid asking rents, but as vacancies rise, landlords are expected to become more flexible. However, for popular prime spaces in sought-after suburban malls which are able to maintain high occupancy levels due to their strong tenant profile, rents will be less affected.”
For the whole of 2020, Cushman & Wakefield expects prime rents in Orchard and Other City Area to fall by about 10 per cent each and suburban prime rents to fall by five per cent.
During the quarter, indoor family attraction Kidzania Singapore announced its closure, four years after operating on Sentosa Island. Popular German-themed Starker Bistro closed all seven of its outlets in Singapore during the quarter too. The market expects more vacant spaces in non-prime locations coming into the market in the second half of 2020 as activity-based tenants are usually located in non-prime spaces within the mall due to their larger size requirements. Furthermore, there could be an overall fall in new demand for retail spaces as some F&B tenants explore delivery options such as cloud kitchens or central kitchens due to current social distancing measures.
Esprit reportedly closed 12 outlets island-wide. It has also been reported that Robinsons will close its Jem outlet in August this year. DFS closed its store at Changi Airport’s 4 terminals, making way for another operator Lotte to take over. Isetan will not renew its lease at Westgate. Nevertheless, some mall operators are able to re-invent space to secure some interesting replacement tenants. JEM was able to re-configure its layout to accommodate IKEA’s first concept store, which will replace the space left by Robinsons. The concept store will open next year.
Mark Lampard, Executive Director, Regional Tenant Representation, said “There is some opportunity for retailers to pursue prime retail spaces during this time as vacancies rise; alternatively, they could also explore suburban prime options for more stability. What is very clear is that retailers have the opportunity to sharpen their e-commerce channels including virtual live sales, given that it is a major mode of transacting business now”.
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