reporter2
17-03-22, 11:38
Fillip for malls, shops in city centre as URA cuts down on strata units
Mar 17, 2022
https://i.imgur.com/4F3xVwT.png
IMPROVED tenant mixes, curated offerings for shoppers, well-maintained malls and fewer vacant units could be in store for the Orchard Road shopping belt and retailers in the Central Business District (CBD), as a result of a new restriction on strata properties.
Real estate consultants welcomed the Urban Redevelopment Authority's (URA) latest policy move prohibiting commercial properties in key parts of the Central Area to be strata subdivided into individual units, as they expect it to largely benefit the retail scene.
The rule applies to locations in the city centre such as Orchard Road, Tanglin Road, Scotts Road (Orchard Road corridor), Shenton Way, Robinson Road, as well as developments near key landmarks of national significance.
According to ERA Realty head of research and consultancy Nicholas Mak, major strata-titled buildings subject to the restriction include Far East Plaza, Tanglin Shopping Centre, Ming Arcade, Orchard Towers and Lucky Plaza in Orchard, as well as Downtown Core's Peninsula Plaza and The Adelphi.
He noted that some of the properties affected are in major retail areas and CBD locations with street-level shops that enjoy busy pedestrian shopper traffic.
Sulian Tan-Wijaya, executive director, retail and lifestyle at Savills Singapore, lauded the announcement as "very positive news" for the sector.
"Strata-owned retail developments, especially the newer ones, have unfriendly layouts and configurations because some developers try to maximise sale prices by creating smaller units that fetch higher per-square-foot prices," she noted.
Besides, in buildings with numerous small units, only the ones with greater visibility or nearer to the entrances will find it easier to secure tenants. Buyers who end up with poorly located units thus have trouble renting their shops out, Tan-Wijaya said.
Another drawback of strata-owned retail properties is that they often have "terrible trade and tenant mixes", as strata owners are free to rent their shops to anyone willing to pay the highest rent, she said.
Edmund Tie head of research and consulting Lam Chern Woon described the latest policy change as "a directed move" towards improving the tenant diversity of malls. "It is generally true that malls with single ownership are able to exercise effective control on the mall's positioning and curation of its tenant mix," he said.
But he pointed out that leasing demand and the effective rents that mall spaces can command are not a direct function of the monopoly power of a single landlord.
Rather, they are a function of the superior retail concept and marketing that a single owner can possibly achieve, which will result in higher, sustained footfall and spending from the desired shopper demographic.
"Single ownership is not a silver bullet in itself for retail success," Lam added.
He reckons demand and occupancy may keep steady or even improve amid the limited supply of existing strata malls. That, coupled with the impending return of tourists to Singapore's shores, implies there may still be a sustainable path for strata retail in the Central Area, he said.
Lee Siew Ling, senior director of retail at JLL Singapore, said that having a single ownership will enable the landlord to curate the tenant mix based on demographics, in contrast to individual strata-titled owners, who often focus on the immediate rental yield.
"However, it will be important that such single ownership does not result in 'overly managed', run-of-the-mill malls with overly duplicated concepts and chain stores, as that will diminish spontaneity and creativity," Lee added.
Meanwhile, JLL Singapore consulting director, research and consultancy, Angelia Phua said URA's move will improve the quality and offerings of commercial properties in those districts over time, when there are redevelopment plans.
In her view, a single landlord providing central management could offer a well-curated and organised tenant mix, coordinated marketing efforts, and better maintenance and upkeep of the property.
"As higher-quality malls generally attract stronger consumer foot traffic and tenants, the restriction on strata subdivision could result in lower vacancy rates at malls in the applicable areas," Phua said. She added that this could in turn support higher rents, as compared to a strata-titled mall with fragmented ownership.
Figures from URA showed that overall rents of retail space in the central region turned a corner in Q4 2021, rising 0.6 per cent in the first increase since Q4 2019. However, for the whole of last year, rents were still down 6.8 per cent, albeit narrowing from the 14.7 per cent drop in 2020.
The islandwide vacancy rate of retail space stood at 8.1 per cent as at the end of last year, unchanged from the third quarter.
Tan-Wijaya from Savills said retail podiums "are the face of mixed-use developments" and thus it "makes perfect sense" for commercial buildings in Singapore's city centre to remain modern, well-maintained and relevant. "Having a strong tenant mix will, over time, also enhance the building's value," she added.
ERA's Mak expects shoppers, consumers and tenants to benefit in the long run if more commercial properties become better managed, maintained and marketed. The urban landscape will also improve in the longer term, as the deterioration and decay of ageing buildings in prominent locations is prevented, he added.
That said, Lam from Edmund Tie drew attention to the strengths of strata subdivided properties. "Not all strata retail is unappealing. For example, if a commercial building has a small floor plate of, say, 1,000 to 2,000 square feet, it makes little sense to insist on a single title."
"Carving the spaces up for a few ancillary F&B (food and beverage) units could still benefit the immediate community," he noted.
Moreover, he has observed that strata malls offer an avenue for local entrepreneurs to kick-start their trades, especially if they find it difficult to secure spaces in conventional malls.
"And while most strata malls have the connotation of repeated trades operating in less than pristine conditions and providing a conduit for illicit activities, strata malls allow for the realisation of agglomeration economies," Lam said.
For instance, both The Adelphi, which is near the Padang, and Sim Lim Square, next to Rochor MRT station, are havens for consumers hunting for audio and electronics. Another example is Fu Lu Shou Complex in Bugis, which is popular for souvenirs, handicrafts and antiques.
"These malls are also popular among tourists. The subdued tourism climate has shone the light on the sustainability of such business models, but arguably, they do represent an important aspect of our heritage," he said.
https://i.imgur.com/nxYF3tZ.png
Mar 17, 2022
https://i.imgur.com/4F3xVwT.png
IMPROVED tenant mixes, curated offerings for shoppers, well-maintained malls and fewer vacant units could be in store for the Orchard Road shopping belt and retailers in the Central Business District (CBD), as a result of a new restriction on strata properties.
Real estate consultants welcomed the Urban Redevelopment Authority's (URA) latest policy move prohibiting commercial properties in key parts of the Central Area to be strata subdivided into individual units, as they expect it to largely benefit the retail scene.
The rule applies to locations in the city centre such as Orchard Road, Tanglin Road, Scotts Road (Orchard Road corridor), Shenton Way, Robinson Road, as well as developments near key landmarks of national significance.
According to ERA Realty head of research and consultancy Nicholas Mak, major strata-titled buildings subject to the restriction include Far East Plaza, Tanglin Shopping Centre, Ming Arcade, Orchard Towers and Lucky Plaza in Orchard, as well as Downtown Core's Peninsula Plaza and The Adelphi.
He noted that some of the properties affected are in major retail areas and CBD locations with street-level shops that enjoy busy pedestrian shopper traffic.
Sulian Tan-Wijaya, executive director, retail and lifestyle at Savills Singapore, lauded the announcement as "very positive news" for the sector.
"Strata-owned retail developments, especially the newer ones, have unfriendly layouts and configurations because some developers try to maximise sale prices by creating smaller units that fetch higher per-square-foot prices," she noted.
Besides, in buildings with numerous small units, only the ones with greater visibility or nearer to the entrances will find it easier to secure tenants. Buyers who end up with poorly located units thus have trouble renting their shops out, Tan-Wijaya said.
Another drawback of strata-owned retail properties is that they often have "terrible trade and tenant mixes", as strata owners are free to rent their shops to anyone willing to pay the highest rent, she said.
Edmund Tie head of research and consulting Lam Chern Woon described the latest policy change as "a directed move" towards improving the tenant diversity of malls. "It is generally true that malls with single ownership are able to exercise effective control on the mall's positioning and curation of its tenant mix," he said.
But he pointed out that leasing demand and the effective rents that mall spaces can command are not a direct function of the monopoly power of a single landlord.
Rather, they are a function of the superior retail concept and marketing that a single owner can possibly achieve, which will result in higher, sustained footfall and spending from the desired shopper demographic.
"Single ownership is not a silver bullet in itself for retail success," Lam added.
He reckons demand and occupancy may keep steady or even improve amid the limited supply of existing strata malls. That, coupled with the impending return of tourists to Singapore's shores, implies there may still be a sustainable path for strata retail in the Central Area, he said.
Lee Siew Ling, senior director of retail at JLL Singapore, said that having a single ownership will enable the landlord to curate the tenant mix based on demographics, in contrast to individual strata-titled owners, who often focus on the immediate rental yield.
"However, it will be important that such single ownership does not result in 'overly managed', run-of-the-mill malls with overly duplicated concepts and chain stores, as that will diminish spontaneity and creativity," Lee added.
Meanwhile, JLL Singapore consulting director, research and consultancy, Angelia Phua said URA's move will improve the quality and offerings of commercial properties in those districts over time, when there are redevelopment plans.
In her view, a single landlord providing central management could offer a well-curated and organised tenant mix, coordinated marketing efforts, and better maintenance and upkeep of the property.
"As higher-quality malls generally attract stronger consumer foot traffic and tenants, the restriction on strata subdivision could result in lower vacancy rates at malls in the applicable areas," Phua said. She added that this could in turn support higher rents, as compared to a strata-titled mall with fragmented ownership.
Figures from URA showed that overall rents of retail space in the central region turned a corner in Q4 2021, rising 0.6 per cent in the first increase since Q4 2019. However, for the whole of last year, rents were still down 6.8 per cent, albeit narrowing from the 14.7 per cent drop in 2020.
The islandwide vacancy rate of retail space stood at 8.1 per cent as at the end of last year, unchanged from the third quarter.
Tan-Wijaya from Savills said retail podiums "are the face of mixed-use developments" and thus it "makes perfect sense" for commercial buildings in Singapore's city centre to remain modern, well-maintained and relevant. "Having a strong tenant mix will, over time, also enhance the building's value," she added.
ERA's Mak expects shoppers, consumers and tenants to benefit in the long run if more commercial properties become better managed, maintained and marketed. The urban landscape will also improve in the longer term, as the deterioration and decay of ageing buildings in prominent locations is prevented, he added.
That said, Lam from Edmund Tie drew attention to the strengths of strata subdivided properties. "Not all strata retail is unappealing. For example, if a commercial building has a small floor plate of, say, 1,000 to 2,000 square feet, it makes little sense to insist on a single title."
"Carving the spaces up for a few ancillary F&B (food and beverage) units could still benefit the immediate community," he noted.
Moreover, he has observed that strata malls offer an avenue for local entrepreneurs to kick-start their trades, especially if they find it difficult to secure spaces in conventional malls.
"And while most strata malls have the connotation of repeated trades operating in less than pristine conditions and providing a conduit for illicit activities, strata malls allow for the realisation of agglomeration economies," Lam said.
For instance, both The Adelphi, which is near the Padang, and Sim Lim Square, next to Rochor MRT station, are havens for consumers hunting for audio and electronics. Another example is Fu Lu Shou Complex in Bugis, which is popular for souvenirs, handicrafts and antiques.
"These malls are also popular among tourists. The subdued tourism climate has shone the light on the sustainability of such business models, but arguably, they do represent an important aspect of our heritage," he said.
https://i.imgur.com/nxYF3tZ.png