Guide To Retail And Office Leasing In Singapore
Singapore is a global financial centre with a multicultural population.
With more than five million people living in an area of 700 square kilometres, Singapore ranks among economies and countries as third in population density, according to the World Bank.
This influences the different types of commercial leasing spaces available and in demand around the city – with retail, office space and industrial units all part of the mix.
Traditional retail spaces are usually for established companies with a long term commitment and looking to have an established retail presence. Pop up concept stores (kiosks) are also available to lease and usually suited to short term or seasonal offerings, or for smaller businesses or startups looking to test the market or a new location.
Study on retail rental space
The Credit Counselling Singapore (CCS) commissioned a market study on retail rental space in Singapore to better understand the state of competition in the retail mall rental market. Based on the report, retail space in Singapore can be classified as private or public space.
Private space includes:
- Areas owned by property funds like the Liang Court
- Developer owned space like United Square
- Strata-tilted retail areas like Queensway Shopping Centre
- REIT-owned retail space such as Plaza Singapura.
Public space is classified as property and retail spaces such as:
- HDB owned retail space (for example Tan Boon Liat Building)
- HDB shop units
- Properties owned by government agencies.
According to the study, Singapore shop space totals 3.22 million square meters and is split as 64% private sector and 36% public sector.
Retail vacancy rate
In Q4 2018, a report by Savills Retail revealed that the island-wide vacancy level hit a record high of 8.5%. But this figure was partly boosted by an injection of over 0.9 million sq ft of retail stock.
Food & Beverage defying odds
Despite this, a booming Food & Beverage sector is set to help support overall retail rental levels. Fast-casual dining and fast-food chains continue to drive Singapore F&B sector revenue, and some restaurant groups have diversified and expanded into the fast-food market. Restaurants and cafés can take designated F&B spaces that are usually fitted with a kitchen, water, drainage. If they want to use a traditional shop, they need to apply for a change of use with the landlord and local authorities.
Shopping centre rents stable despite higher vacancy
The major shopping destination in Singapore remains the Orchard area and this is still the key shopping belt. Despite the continued tightening of vacancy rates in the Orchard Area, Savills claimed that prime monthly rents have remained level at around S$29.90 per sq ft for three years. This is largely because tenants are remaining conscious of costs.
While properties in Orchard remain in high demand, certain suburban malls in the densely populated residential precinct can also match the demand for Orchard road spaces. We have seen an increasing development of suburban malls bringing retail closer to major residential areas. For example, Jem Shopping Centre in Jurong East and NEX Shopping Centre in Serangoon.
Another obstacle that could potentially face retailers looking to lease space in these areas is the fact that they need to seek approval from the mall management team to ensure that their type of business fits the retail mix for the property and complements existing tenants.
The future of retail leasing
In an interesting twist to the retail sector, brands that began life as online-only services have started to open Bricks and Mortar stores to gain a presence in both online and offline retail. This mixed concept helps to attract customers from both crowds. And this is set to be a major future trend in retail leasing.
Singapore office space performance
The commercial office market within Singapore ended strongly in 2018. The net absorption rate over the year for the CBD doubled that recorded in 2017. It was also the highest uptake recorded since 2012.
As a result, Singapore CBD rents rose again, which is the seventh consecutive quarter that CBD rents have gone up. And this strong performance reflected in the average rent growing to $10.80 per square foot.
Investors also continued to find confidence in the potential of rental growth in commercial office spaces in Singapore, with major investment deals and sales of shares in major companies taking place.
The loss of office stock in the CBD, including Chevron House, has added to the limited supply of new CBD office buildings and is likely to push vacancy rates down. With ongoing steady demand for CBD office space there could be frictional levels of prime space available which would support even higher rents in 2019.
However, the availability of office supply outside the CBD, could ease some of the pressure on rents and cap the level of growth to that below that recorded in 2018. New build business parks, in particular, are attracting good take up from technology firms.
About Tenant CS
Tenant CS is a tenant advisory firm based in Singapore and Australia. We represent commercial retail and office tenants and can help you with your business relocation, rent negotiation and more! Get in touch with our team for any of your property needs.