Investors Haven’t Lost Interest Even Though E-Commerce May Be Biting Singapore’s Retail Real-Estate

Investors are still eyeing the city-state of Singapore as Singapore’s malls have felt the pinch similar to the other bricks-and-mortar retailers globally who have taken a hit from e-commerce.

But that doesn’t mean investors are entirely gung-ho.

But expecting the commercial sectors would likely correct further over the next six to 12 months, he’s still evaluating potential investments into Singapore, said Rushabh Desai, head of Asia-Pacific for Allianz Real Estate.

“We are looking at retail that is non-discretionary. The larger portion of the retail is nondiscretionary, even if it’s suburban retail,” he said on the sidelines of the ULI Asia Pacific Summit in Singapore on Wednesday. “I think that is a strong subsector within retail versus the luxury outlets.”

But rental yields would still be low, he noted.

“Even if the prices fall, I think it’s not going to go from a 4 percent yield to a 6 percent yield, it’ll be 25-50 bps movement,” Desai said.

Apart from investing in other property-related assets, Allianz Real Estate can buy physical properties as well as it is a long-term investor. Currently invested in Asia is around 2 percent of its global portfolio, which was around 50 billion euros ($56.28 billion) as of the end of 2016.

While vacancies have risen, retail rents in Singapore have already dropped sharply.

According to data from the government, down from levels around 120 in 2012, the retail rental index fell 2.9 percent on-quarter to 101.1 in the first quarter of this year.

The island nation has a pipeline of around 606,000 square meters of retail space to look forward to and the vacancy rate rose to 7.7 percent in the first quarter, from 7.5 percent in the previous quarter.

The vacancy rate was 7.6 percent in the first quarter, up from 6.8 percent in the previous period, in the Orchard planning area, where the tony Orchard Road shopping district is located.

Even as the total excluding motor vehicles rose 0.7 percent on-year, supported by rising petrol station sales, with computer and IT equipment sales declining 5.2 percent on-year and with department store sales in March falling 3.6 percent on-year, retail sales have been squeezed.

But many of Singapore’s malls remain as productive on a sales-per-square-foot basis as some of the top-tier malls in the U.S., noted Daiwa property analyst David Lum in a report this week.

Sales-per-square-foot that were comparable to the more luxury-oriented Orchard Road malls were reported from the best-performing malls in the suburbs, which in tiny Singapore excludes the central business district and other central areas, Lum also noted.

while a B-grade mall brought in around $415, the highest-grade malls in the U.S., which numbered less than 40 there, generated sales of around $965 a square foot a year, according to the report which cited data from research firm Green Street Advisors.

“The absolute productivity of suburban malls is probably underappreciated by the market,” he noted, pointing to their near-total reliance on nearby housing estates and proximity to transportation links.

Saying that the city-state’s underperforming malls could add more “retail experiences” to complement the nearby stores, Lum also wasn’t convinced that e-commerce would necessarily be entirely negative for the retail-property sector.

(Adapted from CNBC)

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Categories: Economy & Finance, Geopolitics, Strategy, Sustainability, Uncategorized

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