Weak retail sector to hurt CapitaLand Mall Trust's rental growth this year

Rental growth will slow down to 1%.

Analysts are not seeing a bright year ahead of CapitaLand Mall Trust as retail demand remains weak.

According to RHB, the group's rental growth is to slow down to 1% this year, compared to its 10-year average growth of 6% per annum. This comes as the Singapore retail sector undergoes a structural transformation amidst challenging macro-economic conditions.

"Retail demand remains weak with the seasonally adjusted retail sales index (excluding motor vehicles) continuing to decline by 2.1% YoY and 0.3% QoQ in Nov 2016. On the supply side, about 3.3m sq ft (9% of total inventory) is expected to come on-stream over the next three years, pressuring rentals," RHB said.

With this, the brokerage firm said only defensive suburban malls situated in areas with a good catchment population will remain resilient.