The Urban Redevelopment Authority (URA) has released, for the first time, what is said to be a more comprehensive set of data on retail space. But its rental index, showing rentals at retail malls in the Central Region dipping slightly in the first quarter, drew disbelief from retailers. Retailers and food & beverage (F&B) operators told BT that the marginal 0.3 per cent decline in the rental index from a quarter ago is puzzling, given that they have seen a steady rise in rents in their rental renewals with the landlords.
URA’s rental index is flat from a year ago and rose 1.1 per cent over the past three years. The Central Region covers the core downtown area and city fringe areas such as Paya Lebar and Holland.
For the first time, URA’s data includes non-shop space such as food and beverage, entertainment and health and fitness – which is applauded by analysts for factoring in a shift in leasing activity towards these sectors. But retailers felt that these figures still do not reflect what is truly happening on the ground.
“For every three years that our rents are being reviewed, rentals are going up steadily,” said John Yek, managing director of RE&S Enterprises, which owns several Japanese restaurants islandwide. “For sure, they are not flat if I compare to three years ago.”
Elim Chew, founder of fashion retailer 77th Street, said that rentals have soared over the past three years, prompting the company to close some outlets. The median rents may not take into account the component that tenants pay as a percentage of their sales.
Meanwhile, URA’s retail price index for the Central Region showed a 3.2 per cent rise in the first quarter from a year ago and is unchanged from a quarter ago.
The discrepancy between the indices and ground sentiments could be due to the fact that the data looks at rentals and prices in the Central Region and excludes suburban malls in areas such as Jurong East, Tampines and Bedok, property consultants say.
More detailed information, however, is made available on commercial properties for free on URA’s website. Office and retail rents can be searched by street name and includes far-flung areas where new malls have sprung up.
Retailers hold a different view, however. R Dhinakaran, managing director of Jay Gee Melwani Group, a retailer of international names in lifestyle and apparel, said that shop rentals have increased for the group islandwide. Rentals account for more than half of the group’s overheads and its margins are squeezed, he said.
To cope with rising rentals, Ms Chew of 77th Street said that the company has moved into wholesale distribution, e-commerce and consultancy work for overseas brands. According to her, local retailers may be paying much higher rents on a per square foot basis in some malls than the international brands, which are more sought after by the landlords.
Kurt Wee, president of the Association of Small and Medium Enterprises, noted that retailers and F&B players “have no bargaining power” and regulation is required to protect them from unreasonable tenant clauses.
URA data shows that there are 928,000 sq m of new gross retail space in the first quarter, of which 634,000 sq m is under construction. Some 256,000 sq m of gross retail space is expected to be completed by the end of this year.
Source: Business Times – 26 April 2014