Suburban prime retail rents rose 0.3% in Q1

Travel bans and circuit breaker measures could further affect retail.

Prime retail rents inched up by 0.3% QoQ to $31.85 per square foot per month (psf/mo) in Q1, according to Cushman & Wakefield, as suburban malls remained open for trades until the end of March 2020.

However, the report warns that extended travel bans and circuit breaker measures could further affect retail, as footfall in the shopping malls almost came to a halt. Just in Q1 2020, Orchard Road’s monthly prime rents fell by 1.4% to $35.27 psf, whilst those in other city areas fell by 0.6% to $21.63 psf.

Orchard Road may see the largest impact on rents, which could fall to 10% in 2020, whilst mall rents in other city areas, including Marina Centre, Newton, Harbourfront, will also be affected as most workforce are working from home.

Retail leasing activities in Q1 included Don Don Donki’s 26,000 sqft expansion at JEM, Shake Shack’s expansion at 89 Neil Road and Grab Kitchen’s new 6,000 sqft space at 63 Hillview Avenue.

Meanwhile, retail sales could also potentially drop by about 7% in 2020, as both tourist and domestic spending took a plunge. The decline is said to be even more pronounced than that of the Global Financial Crisis (GFC) and SARS.

Significant government intervention such as deferment of contractual obligations, solidarity packages, property tax and rental rebates, has helped mitigate some of the impact on tenants. These will also help alleviate cash flow issues of tenants and continue their operations over the short term.

The report adds that beyond the government’s stimulus package and intervention, retailers and landlords also need to accelerate their digital transformation to strengthen their resilience as consumer behaviour looks set to change.