http://www.straitstimes.com/archive/...m-bet-20140930

Strata-titled shops a 'good long-term bet'

Published on Sep 30, 2014 1:38 AM

By Cheryl Ong


RETAIL property is experiencing mixed fortunes these days, with prices holding firm amid investor demand while rents soften as consumer spending slows.

A state of the market report by consultancy DTZ suggests that buyers of shop space might be on to a long-term winner, given the limited supply of strata-titled units.

Only 10 per cent of the 5.5 million sq ft of retail space expected to come onstream from the last quarter of the year to 2019 is estimated to be strata-titled, said Ms Lee Lay Keng, regional research head at DTZ.

"This limited supply supports the potential for capital appreciation in the long term, and is one of the reasons why investor interest in strata-titled retail units remains healthy despite yield compression," she added.

About 100 strata-titled shops were sold in the third quarter, according to Urban Redevelopment Authority data. In the second quarter, 128 units were sold.

But retailers are slowing their take-up of new shop space amid flagging sales and tighter labour policies. The completion of refurbishment work at malls such as Shaw Centre, Chjimes, Suntec City and HillV2 - a mixed development in Hillview - means a total of 924,300 sq ft of new retail space has been added since the start of the year.

But in the first half, only 62,400 sq ft of space was taken up - well down from the 326,000 sq ft in the same period last year, said DTZ.

The sluggish demand sent average rents in the prime shopping belt of Orchard Road and Scotts Road down 0.3 per cent from the second quarter to the third, their first decline in more than a year.

Average rents in the rest of the city fell by 1 per cent in the third quarter after slipping 0.3 per cent in the second. Suburban rents fell 0.5 per cent over the same period.

"Within shopping malls - both old and new - there is more available space, especially on the higher floors where catchment or footfall may be lower," said Ms Anna Lee, director of retail at DTZ.

Other than the manpower crunch, retailers also have to manage competition from e-commerce firms, said DTZ.

"Landlords are now more flexible on asking rents by providing various incentives in their rental packages," added Ms Lee. "Retailers, on the other hand, continue to focus their efforts and resources on outlets that are more successful, putting off expansion plans in the interim."

DTZ also warned investors keen on smaller strata-titled units that rental demand from small retailers could be weaker in today's challenging shopping scene.

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