Why were Singapore’s retail rental declines delayed?

Analysts say rents should have started falling two quarters ago.

According to a Savills report, while intense competition from new market entrants is helping to lift prime retail rents in Singapore, overall average rents are projected to see moderate growth for the rest of the year. 

Given margin compressions that retailers and F&B operators face, the report said that rents should have started falling a quarter or two ago but because of the entry of foreign F&B operators, they held up rents, thereby aggravating the situation of the existing operators.

“However, we believe that this may not persist because falling or negative margins may pervade across the retail and F&B landscape causing more to exit than foreigners entering. Therefore, despite the tight supply pipeline in the next three years, overall rental growth is expected to generally head sideways in the next few quarters,” the report added.

Labour shortages and rising operating costs will continue to dog retail and F&B businesses capping rental growth as landlords prioritise getting their malls filled. However, prime shops may still experience healthy demand, and their rents may even rise.