CAPITAL VALUES OF STRATA RETAIL UNITS UP IN Q2

Singapore saw the capital values of strata retail units increase in Q2 while retail rents remained relatively flat, according to a DTZ report.

Singapore saw the capital values of strata retail units increase in Q2 while retail rents remained relatively flat, according to a DTZ report.

Notably, both the average resale capital values of prime retail units in suburban areas and Orchard/Scotts Road increased 0.8 percent quarter-on-quarter, based on a basket of completed properties monitored by DTZ Research.

"Capital value growth is expected to stay firm due to the limited supply of prime strata retail units. While investor interest in strata retail units remains strong due to their relatively affordable quantum and the absence of cooling measures for the retail sector, the limited supply means that sellers require a premium before letting go of their units," said Lee Lay Keng, DTZ's Regional Head (SEA), Research.

"Prime strata retail units in Orchard/Scotts Road continue to be highly sought-after by investors due to the scarcity of such units."

In other city areas, resale capital values of prime strata retail units were flat in Q2.

The report noted that while retail rents remained flat in most areas in Q2 due to the differing expectations of landlords and retailers, only upper-storey retail rents in other city areas posted a marginal decline of 0.8 percent quarter-on-quarter.

Anna Lee, DTZ's Director of Retail, revealed that tenant sales in some shopping malls declined this quarter, which could potentially affect rental negotiations going forward.

"Even though landlords may offer flexible leasing arrangements, retailers continue to be cost-conscious and seek to keep their occupancy costs low as they grapple with other variable factors such as food, labour and management costs," she added.

The decline in tenant sales is also in line with the fall in retail sales in April 2014, based on the Department of Statistics data.

Moreover, the drop in retail sales may have been aggravated by the decline in tourist arrivals to Singapore.

But despite the lacklustre retail sales, DTZ still expects retail rents to remain firm or trend upwards in Orchard/Scotts Road, on the back of limited supply.

Notably, only around 4.9 percent of the total pipeline supply up till 2018 of 5.8 million sq ft will be located in Orchard/Scotts Road.


Nikki De Guzman, Editor at CommercialGuru, wrote this story. To contact her about this and other stories, email nikki@propertyguru.com.sg

Source: CommercialGuru.com.sg

Date Post: 26/6/2014
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