SINGAPORE: Rental values are likely to continue to slide in 2016, though this dip is not expected to last for too much longer, according to real-estate consulting firm DTZ Southeast Asia.
Consumer sentiments, coupled with the expected completion of retail developments such as OUE Downtown Gallery, The Heart at Marina One and Tanjong Pagar Centre this year, are expected to "exert further downward pressure on rentals values, especially in other city areas", DTZ said in a press release on Wednesday (Jan 13).
This comes after average islandwide first-storey rents dipped by 1.2 per cent to S$30.50 per square foot in the fourth quarter of 2015 compared to the previous quarter, according to DTZ.
The consulting firm said this was the third consecutive quarter of decline since the second quarter of 2015. Overall, average first-story rents fell 5.9 per cent in 2015, compared to a 0.3 per cent dip in 2014.
This decline was attributed to "weakened consumer sentiments amid uncertain global economic conditions", said the consulting firm.
However, the decline in rents this year expected to be temporary, said DTZ's Director of Research Dr Lee Nai Jia.
“While the pending completions in 2016 will pressure retail rents in other city area to fall, the decline is likely to be temporary," said Dr Lee. "We anticipate retail rents to recover when the residential components in the mixed-use developments receive their Temporary Occupation Permits. The increase in resident population in the other city area will support the retail trade."
RENTS DOWN, BUT OCCUPANCY STILL HEALTHY
Rents in Orchard Road and Scotts Road saw the least decline last year, said DTZ. The average first-storey rents in the area fell 5 per cent in 2015 compared to the previous year.
In suburban areas, average first-story rents fell 5.7 per cent last year compared to 2014. However, in the other city areas, there was a 6.9 per cent year-on-year fall in rents, "largely due to area’s dependence on the weekday office crowd for sales volume", said DTZ.
While rents fell, occupancy rates remained healthy, said the consulting firm. "In fact, overall retail occupancy inched up 0.3 percentage point to 92.1 per cent in the third quarter of 2015, according to the latest URA statistics," it said.
Occupancy rates in Orchard and Scotts Road remained unchanged at 92 per cent in the third qurater 2015, while occupancy rate in the other city areas and suburban areas inched up 0.6 percentage points and 0.1 percentage points to 90.6 per cent and 93.1 per cent, respectively, compared to the previous quarter.