Retail property investment sales jumped 52% to $961m in Q2

Chinatown Point was sold for $520m or $2,450 psf NLA.

Retail property investment sales sealed its second quarter of remarkable growth, climbing 52% QoQ amidst only two transactions totalling $961m, according to a report by Edmund Tie & Company (ETCo).

The report noted that the largest sale transaction was Chinatown Point which sold for $520m or $2,450 psf NLA to a foreign institutional investor, with an estimated entry yield of 2-3%.

Meanwhile, islandwide net absorption fell by more than 98% QoQ to just 5,000 sqft in Q1 2019. Likewise, net supply fell by about 78% QoQ as there were lesser completions. “As such, islandwide occupancy declined slightly by 0.4ppt QoQ to 90.1% in Q1 2019,” the firm said. The opening of Funan with 325,000 sqft NLA and 95% pre-leased, is also not expected to significantly impact occupancy rates in Q2 2019.

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Singapore’s retail haven, Orchard/Scotts Road’s occupancy rate dipped 1ppt QoQ to 93.9% in Q1. Despite the closure of a number of food and beverage outlets in the previous quarter, ETCo noted that Q2 saw new store openings, including Thai online fashion brand Pomelo Fashion at 313@Somerset and Taiwanese bubble tea chain CHICHA San Chen also in 313@Somerset.

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In other city areas, the firm noted that net absorption contracted by 16,000 sqft in Q1 2019 vis-à-vis 102,000 sqft in Q4 2018. “Retail remains challenging, especially during after working hours and weekends when foot traffic drops significantly vis-à-vis during office hours,” the report said. In Q2, the area saw the opening of Funan, of which food and beverage accounted for some 25% of total retail offering whilst 30% were new-to-market brands, including Taobao, Brompton Junction and Dyson.

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For suburban areas (SA), net demand and supply for retail spaces slowed in Q1 with the occupancy rate down marginally. Despite this, ETCo thinks that prime located malls with easy transportation access and a diverse and well-managed tenant mix, continued to perform relatively well. The area witnessed new retailers sprouting such as the Cafe Amazon outlets at Jewel Changi and Jurong Point Shopping Centre, and Taiwanese bubble tea chain Xing Fu Tang at Century Square in Q2 2019.

“With the opening of Jewel Changi and Funan in Q1 and Q2, respectively, and PLQ mall in H2 this year (totalling more than 1.2m sqft NLA), the sector remains challenging with tepid sales and growing economic headwinds,” ETCo said. Despite this, the firm is positive that continued investment sale activity for retail malls suggests a good outlook for the sector especially for malls that are well-connected to public transport and offer a well-managed tenant mix, including more experiential and activity-based retail.