Category Archives: Commercial Market

Heartland retailers to get more financial support for upgrading: MND

Heartland retailers will receive greater financial assistance for upgrading works under the enhanced Revitalisation of Shops (ROS) scheme, announced the Ministry of National Development (MND) on Monday (April 11).

The upgraded ROS package, which will cost about S$15 million yearly, was first revealed by Finance Minister Heng Swee Keat in his Budget statement last month.

Since 2007, about half of all Housing and Development Board (HDB) shops islandwide have benefitted from the ROS scheme with upgraded shop fronts and funding support for promotional activities, said Senior Minister of State for MND Desmond Lee.

He revealed that last year, a Revitalisation of Heartland Shops Committee – comprising retailers, grassroots representatives and Merchant Associations (MAs) – was set up to review the ROS scheme, so as to better understand and support the needs of HDB retailers.

FINANCIAL AID

After evaluating suggestions and feedback from the heartland retail community, MND will adjust the co-funding ratio between Government, HDB shopkeeper and Town Council for upgrading works under the ROS scheme.

“What this means is that our shopkeepers pay less, while Government and Town Councils pay more,” said Mr Lee.

“Second, we will provide some start-up funding to support the formation of new Merchants’ Associations,” he added. “HDB will announce the details before launching the next batch of ROS soon.”

MND’s review is ongoing and there may be more in the pipeline, said Mr Lee.

Noting an increasing trend of ice cream parlours, artisan bakeries and hipster cafes being set up in residential estates, he also added that HDB will work with the Ministry of Trade and Industry and SPRING to support young entrepreneurs and SMEs with their heartland retail efforts.

Source : Channel NewsAsia – 11 Apr 2016

Landlord-Anchor tenant relationship in the spotlight

Anchor tenants – like major department stores and big name brands – have long been used to pull the crowds into shopping malls.

But against a more challenging retail landscape, industry analysts told Channel NewsAsia that this strategy may no longer have the same draw.

The landlord-anchor tenant relationship is also coming under the spotlight, amid an ongoing rental dispute between landlord Ngee Ann Development and department store Takashimaya, its long-time anchor tenant at Ngee Ann City shopping centre.

Last week, both parties – which have been in a business partnership for more than 20 years – found themselves in court over a rental agreement.

Ngee Ann City’s landlord, Ngee Ann Development, had proposed to raise the department store’s rent to S$19.83 per square foot, up from S$8.78 per square foot. This was in 2013, after Takashimaya renewed its lease for another 10 years.

While it is possible for anchor tenants to part ways following private negotiations, a property analyst Channel NewsAsia spoke to said it is unlikely to happen in this case.

“The brand Takashimaya has stayed very well and long-lasting because of its strong customer base and international standing. And its positioning – where Ngee Ann City is – is excellent, and you can’t find a replacement location like that,” said Chestertons Managing Director Donald Han.

“Over the years, the Ngee Ann City location has built itself as the premier shopping spot along the Orchard Road belt… Because of that it’s a symbiotic relationship that both want each other to co-exist.”

The anchor tenant model is a traditional one used by landlords, where the anchor tenant’s brand is meant to draw crowds in and set the tone for that mall.

“Wherever they go, footfall traffic will follow. They also bring tenants, which are related to that kind of business, to surround them. So it creates an easier path for landlords to attract other tenants who want to be near the anchor tenant,” said Mr Han.

But one size may no longer fit all.

“For malls that are less well-located, are currently having problems retaining their tenants, or experiencing weak shopper traffic – I believe they will still benefit from having a good anchor. But having said that, having an anchor for the sake of it is really not the answer,” said Sulian Tan-Wijaya, Executive Director, Retail and Lifestyle at Savills Singapore.

“Because if it’s not a strong anchor who can bring in the traffic, it doesn’t make financial sense for the mall – because they pay very low rents.”

Ms Tan-Wijaya added that some malls that lose anchor tenants may not replace them, choosing instead to fill their retail space with a more adventurous mix of tenants. This could increase rental revenue.

Malls like Ion Orchard, for example, have eschewed the model and opted not to have an anchor tenant. And it has appeared to work in its favour, helped by the mall’s central location and proximity to an MRT station.

Newer malls like Somerset 313, Mandarin Gallery and Scotts Square also do not have anchor tenants due to their smaller size.

Source : Channel NewsAsia – 3 Apr 2016

Largest Uniqlo store in Singapore to be located at Orchard Central

Japanese cheap-chic fashion brand Uniqlo will open its first global flagship store in Singapore and in the South-east Asia region “this autumn”, according to a press release on Tuesday (Mar 29).

The new store, which will be the largest in Singapore and the region, will be located in Orchard Central, and will have a sales area of about 2,700 square metres across three levels in the mall, the company said.

The store will also create more than 300 jobs in Singapore, Uniqlo added.

“We are very honoured, and excited, to open our first Uniqlo Global Flagship Store in Singapore. Having been a member of the local retail scene since 2009, we remain committed toward contributing to the local community and being an integral part of Singapore’s growth and future,” said Mr Taku Morikawa, Uniqlo Southeast Asia CEO.

The Singapore global flagship store will add to existing such stores, including those in New York’s Fifth Avenue, London’s Oxford Street, and Ginza in Tokyo.

Source : Channel NewsAsia – 29 Mar 2016

Orchard Road malls seek new ways to draw the crowds

As Singapore retailers face pressure from the slowing economy, Orchard Road malls are looking for new ways to draw the crowds.

Besides renovating the mall and changing the tenant mix, landlords are also throwing in free performances in a bid to attract the crowds.

For example, over the weekend, shoppers at ION Orchard witnessed a series of aerial circus acts. The performances marked the completion of ION Orchard’s recent revamp, which saw a refreshed facade and new tenants such as Tiffany & Co and French-Italian luxury lifestyle brand Moncler.

Orchard Turn Developments, which manages ION Orchard, said it is important to enhance the shopping experience.

Said Mr Chris Chong, chief executive of Orchard Turn Developments: “Increasingly, retail is not just about shopping but also about entertainment, bringing new novel experiences. Last year, we did a butterfly dome featuring live butterflies from the Crysalis. This year, we will bring an exciting new experience with the aerial sphere. We hope shoppers will enjoy this new experience and as a result also enjoy shopping with us.”

Orchard Road retailers have been hit by a slowing local economy and weak visitor arrivals in the past two years. Analysts estimate that Orchard Road rents fell last year and could drop by another 3-5 per cent this year.

Besides ION Orchard, other malls being refurbished include Centrepoint and Wisma Atria.

IMPROVE OVERALL EXPERIENCE: JLL

Property consultancy JLL said that not all Orchard Road malls require a complete physical overhaul. But landlords and retailers must work together to improve the overall retail experience, amid competition from online retailers and suburban malls.

Ms Regina Lim, national director of advisory and research at JLL, commented: “I don’t think it has to be a total refreshment or refurbishment; it’s about being more aware of giving shopping a reason to come to your shop or to your mall.

“So even if the mall isn’t getting a facelift, I think retailers and landlords need to think about giving some reason for families to come down and visit rather than just buy it online.

“In this day and age where there is quite a bit of supply along Orchard Road, you really need to proactively think about how you want to make your mall a little bit different from the rest and engage the public to come down to the mall to shop. Because people really want to integrate shopping online and offline and going to the mall has to come with some kind of experiential performance and events,” Ms Lim added.

Source : Channel NewsAsia – 14 Mar 2016

Subletting of excess space emerging as viable option for firms

Subletting of excess space seems to be emerging as a viable option for tenants to ease their rental burden, as they look to navigate a slowing economy.

With the latest spate of corporate downsizing by financial institutions, some companies may be giving up office space before their leases have expired. For these firms, they may – with the landlord’s approval – look to sublet the space to another firm.

This practice of subletting is typically known as “shadow space”. And in a market already facing pressure from brand new supply coming on stream later this year, such as Guoco Tower, Marina One and Duo, analysts said that such subletting agreements are expected to drive rents down even more.

Mr Desmond Sim, head of research for Singapore and Southeast Asia at CBRE, explained: “Shadow space or secondary stock would put more pressure on rents, because there is the base rent which is already being signed in, so often there will some discount given to attract a sub-tenant to come in and take up this space. So there will be more pressure on the rent.

“On the landlord side, while they are still taking in this base rent, the pressure for them is when this lease of this shadow space expires; it becomes a primary vacancy, so that is also putting some pressure on landlords which want their space to be occupied or leased for the long term.”

Given the depressed sentiments in the office market, potential tenants are in a stronger position to bargain as they will have the pick of where they would like to set up an office.

Experts said landlords will have to be innovative when looking for ways to convince tenants to sign leases.

Said Ms Christine Li, director of Singapore research at Cushman & Wakefield: “Landlords have to be very realistic when they negotiate a renewal, especially with the anchor tenants, because if you look at some of the banks, they can easily take up to one-third of the whole building. So in the event that the tenants decide to relocate, it will be difficult for the landlord to fill up that one-third.

“And landlords will have to settle probably for a smaller tenant or they will have to consider sub-dividing the floor space to accommodate multiple tenants.”

Property consultancy CBRE estimates that between now and 2017, rents are expected to decline by between 18 and 20 per cent. However, it added that the sector could see a recovery in 2018, when new supply drops.

Source : Channel NewsAsia – 3 Mar 2016

Singapore office vacancies to rise as economy slows

Vacancies at Singapore’s gleaming office towers are nearing their highest level in almost a decade, with construction of the city-state’s tallest building – GuocoLand Ltd’s 64-floor block in the financial district – wrapping up just as the economy slows.

Singapore’s export-oriented economy has been hit by the slowdown in China and beyond, which has also put pressure on key sectors such as marine oil and gas, commodity trading and banks. Last year, the economy grew at just 2 per cent, its slowest pace since 2009.

A January review by real estate services firm JLL of major foreign international banks in the financial district showed half had either reduced the size of their office space over the past year and a half, or had to contend with extra space.

Analysts predict vacancy rates will continue to rise this year, with JLL estimating prime office rents to fall between 10 per cent and 20 per cent after dropping 15 per cent last year in a city that is ranked the eleventh most expensive in the world to rent top quality offices.

Nicholas Mak, executive director at SLP International Property Consultants, said many of the buildings that are now ready for occupancy were planned about five years ago, towards the end of the global financial crisis. “Many people thought that this is the new boom, let’s try to capitalise on it. Nobody expected the party to end by end of 2015,” he said, adding that office vacancy rates could hit 13.5 per cent, a level not seen since 2005.

Broader cost-cutting at banks due to the slowdown in the global economy is likely to have an impact on vacancies as financial institutions are key tenants for prime commercial space in Singapore.

Barclays will cut about 1,000 jobs in investment banking worldwide and close its cash equities business in Asia, an internal memo seen by Reuters showed.

Societe Generale gave up two floors in an office tower after selling its private banking activities in Asia to DBS Group Holdings in end-2014, taking up a smaller space in an existing building instead.

Mak said vacancy rates could improve by the end of next year if the economy picks up and as demand catches up with the supply, easing the glut.

In the meantime, office landlord are limiting the number of leases that will expire over the next couple of years as well as diversifying their tenants to cope with the glut. “This will be a short-term blip,” Lynette Leong, chief executive of CapitaLand Commercial Trust, said in January.

Banking, insurance and financial services represented 33 per cent of Capitaland Commercial Trust’s tenant mix at end-2015, compared with 38 per cent five years ago, its results show.

BT – 1 Mar 2016

Two Dempsey Road blocks to be developed for retail, F&B use

A tender to develop Blocks 17 and 18 Dempsey Road was conducted by the Singapore Tourism Board (STB) and Singapore Land Authority (SLA) on Thursday (Aug 13).

The two blocks, within the Dempsey cluster of Tanglin Village, will be developed for retail and food and beverage (F&B) use, and the joint effort between both agencies aims to “strengthen the Tanglin Village’s position as a unique lifestyle enclave and encourage the development of interesting lifestyle concepts”. the joint press release said.

Currently, Block 18 houses retail and F&B outlets and its tenancy expires on Feb 29, 2016, while Block 17 is vacant, said SLA.

SLA will adopt the Price and Quality evaluation format to conduct the tender, with 40 per cent of the overall score for the bid price and 60 per cent for the quality of the concept. This means the site may not be awarded to the operator that submits the highest bid price. Rather, the quality of the proposed concept will be a key consideration in determining the winning bid, the press release said. The tender closes on Sep 15.

Mr Lee Seng Lai, Director of Land Operations (Private) Division at SLA, said: “The introduction of the Price and Quality tender will help bolster Tanglin Village’s unique character and charm as a popular lifestyle enclave for all Singaporeans.”

This is the first time the Price and Quality evaluation format is being used for commercial and F&B use, SLA told Channel NewsAsia. This follows the 2013 announcement when such a tender evaluation format was used to assess bids put in by child care and kindergarten operators for state-owned properties.

Mr Desmond Sim, head of research at CBRE, said: “Traditionally, if you look at these two blocks, it is the gateway to Dempsey, because it is the first two blocks you will encounter when you move into Peirce Road. So, definitely a good dining concept would definitely be accepted. And of course, any new concept on retail will never be shown the door. It will definitely be accepted as well.”

Source : Channel NewsAsia – 14 Aug 2015

Mid-tier hotels outperform luxury hotels in H1: CBRE

Midscale and economy hotels in Singapore performed better than their luxury counterparts in the first six months of 2015, reversing the trend seen in previous quarters, property services firm CBRE said in a report on Wednesday (Aug 12).

This is because tourists from the region had become more price-sensitive in light of the Singapore dollar’s appreciation against currencies like the ringgit and rupiah.

CBRE estimates the occupancy rates for midscale hotels rose 2.8 percentage points year-on-year to 83.8 per cent, while occupancy for economy hotels rose 1.2 percentage points to 82 per cent. Occupancy in the luxury segment decreased 5.2 percentage points to 80.6 per cent.
For the hotel sector as a whole, the overall average daily rate (ADR) decreased 3.4 per cent to S$251.48.

Looking ahead, CBRE said it expects Singapore’s tourism industry to face several headwinds if the Singapore dollar continues to appreciate against regional currencies. Within Asia, competition for tourist dollars has intensified, with Thailand and Japan boasting strong visitor arrivals.

A steady supply of hotels in the pipeline will continue to put pressure on occupancy rates and ADR over the next 12 months, CBRE added.

Source : Channel NewsAsia – 12 Aug 2015