RETAIL rentals fell islandwide in the first quarter on weak demand, data from DTZ South-east Asia released on Tuesday showed, coalescing with news of retailers consolidating and vacancies on the climb.
According to the consultancy, average monthly first-storey rents fell 1.2 per cent quarter on quarter to about S$30.15 per square foot (psf) in the first three months of the year.
This is the fourth straight quarter of rental decline since Q2 2015. Rentals are now also 7 per cent lower than they were a year ago.
Islandwide occupancy also fell 1.6 percentage points from a year ago to 91.9 per cent.
In the Orchard/Scotts Road area, average monthly first-storey rentals fell one per cent to about S$37.65 psf in Q1. Data from the Urban Redevelopment Authority showed that occupancy rate in the Orchard area fell by 2.1 percentage points year on year to 92.3 per cent in 2015 - the lowest since 1996. Q1 data is expected to be published on April 22.
DTZ said that the increase in visitor arrivals, which form the bulk of shoppers in the shopping belt, actually inched up 0.9 per cent in 2015, but much of the increase was because of the low base in 2014 following a series of aviation accidents.
"Compared to 2013 - a more representative year - visitors arrivals actually declined by 2.2 per cent in 2015," it said.
Then, there is also regional competition to contend with, from markets such as Thailand, South Korea and Taiwan. These markets have more distinctive cultures and offer more affordable shopping, it said.
Cheaper airfares leading to higher mobility throughout the region, as well as a relatively strong Singapore dollar, also boosted the appeal of shopping overseas compared to in Singapore.
Apart from weaker business sentiments, rents were also pressured by the relatively large impending supply in 2016.
Mixed-use projects slated to be completed in the area include OUE Downtown Gallery (177,000 sq ft), Tanjong Pagar Centre (100,000 sq ft) and DUO Galleria (56,000 sq ft).
More outlet consolidations are anticipated amid rising operating costs and weaker in-store sales, DTZ said.
Already, the Al-Futtaim group, which owns Robinsons, has recently said that it would continue to close at least 10 stores in Singapore this year and expand its footprint in other Asian markets.
This came after it announced a number of closures last year, including its Marks & Spencer outlet at Centrepoint, John Little at Marina Square and Tiong Bahru Plaza, along with several other Royal Sporting House (RSH) outlets.
DTZ said that brands that have recently announced business cessation in Singapore include furniture retailer iwannagohome and F&B establishment Smoothie King.
Lee Nai Jia, DTZ South-east Asia's director of research, said: "Despite various challenges such as manpower constraints, retailers and landlords have come up with innovative solutions to counter them. Several retailers have adopted the use of technology - iPads, robots and auto-checkout counters - to manage labour shortages."
Another way has been to boost the quality of service at brick-and-mortar retailers.
DTZ noted that retailers are placing greater emphasis on providing highly personalised services, even undergoing revamps to include private rooms and lounge areas to encourage shoppers to patronise the physical outlet, and also to give them a sense of exclusivity.
Two retailers that have done so are Tiffany & Co and Dior at ION Orchard.
This article was first published on April 6, 2016.
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