Property News: Lower Rents for Retail Spaces in Singapore

Written by: Syasya Nur

Businesses are still adjusting to the realities of the pandemic. While most of them have resumed operations in June 2020, social distancing measures continue to affect businesses that cater to large gatherings or require the physical presence of customers. A recent report shows that the food and beverage (F&B) and retail industries are particularly hard hit, leading to several businesses closing down for good. Other companies have shifted to new methods that comply with safe distancing. How have these changes affected the demand, rental pricing, and vacancies of retail properties in Singapore?

Shift from Physical to Online Shopping

The past months have seen a significant surge in online retail as local and foreign customers continue to avoid crowded spaces. In response, several brands have closed down their physical stores or paused expansion plans:

• Esprit announced that it will shutter 12 outlets in Singapore.
• Robinsons will be exiting Jurong East Mall in August
• Isetan won’t be renewing their lease in Westgate.

Increasing Demand for Cloud Kitchens

Some F&B businesses are replacing physical restaurants with cloud kitchens as a workaround for social distancing measures. Cloud kitchens, also known as “ghost kitchens” are used by companies focusing on food delivery. These are usually cheaper to operate than traditional restaurants since they can be set up in areas with lower rents like business parks. In contrast, restaurants usually require high-traffic locations to make a profit.

It’s no surprise that a multibillion-dollar Singapore company is starting a network of 1,000 “cloud kitchens” across Asia, Europe, and the US in a bid to enter the home-delivery dining market.

Lower Rents for Retail Spaces

As retailers and restaurants continue to adapt to the new normal, commercial spaces are seeing more vacancies, especially in non-prime areas. The average rental price for retail spaces is expected to decrease in the second half of 2020.

• Prime rents in city areas and Orchard are expected to decrease by 10%.
• Suburban prime rents may experience a 5% drop.

On a positive note, prime spaces in malls continue to maintain high occupancy rates due to their strong tenant profile.

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