The perkier retail sector suggests rents could bottom out by the end of this year or early next year, Knight Frank noted in a report yesterday.
It said overall retail rents are expected to fall by 10 per cent to 15 per cent for the whole of this year due to the recession and safe distancing restrictions, although declines in suburban areas will likely be just 7.5 per cent or less.
“As physical retail stores resumed operations, shopper traffic also returned to a greater extent in the suburban malls compared to the centrally located ones that are more reliant on the tourist dollar,” noted Knight Frank analysts.
The rental gap between suburban malls and those in the Orchard area will likely continue to narrow, they added, given much-reduced tourist arrivals.
Suburban retail rents are expected to recover sooner because they are supported by domestic consumers.
Prime retail rents islandwide decreased 10.3 per cent year on year in the third quarter to an average of $27.40 per sq ft (psf) per month.
This drop was largely led by the 11 per cent fall in gross rents for prime retail spaces in the Orchard Road shopping belt as stores continued to struggle with the absence of international tourists, Knight Frank noted.
Prime space refers to units of between 350 sq ft and 1,500 sq ft with the best frontage, connectivity, footfall and accessibility in a mall.
They are typically on the ground or basement level, linked to an MRT station or bus interchange.
Gross rents of prime space in the Marina Centre, City Hall and Bugis region tumbled by 13.5 per cent year on year to $25.40 psf a month on average for the third quarter.
The city fringe posted an 8.6 per cent decline from a year earlier to $23.40 psf a month.
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Suburban areas, where rents started to stabilise in the three months to Sept 30, propped up the retail market.
“As more employees work from home, the malls located within residential population centres were visited by many for daily necessities and household sundries,” the analysts wrote.
The suburban region recorded the smallest drop in gross prime retail rents during the quarter, slipping 6.9 per cent on the year to average $26.60 psf per month.
While traditional retailers such as Topshop at VivoCity and Robinsons at Jem closed in the third quarter, there were also newcomers such as 100-year-old Hong Kong bakery Hang Heung, which opened its first Singapore outlet at Ion Orchard, Knight Frank noted.
Other notable openings included store expansions like Foot Locker at Orchard Gateway @ Emerald and Decathlon at The Centrepoint.
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August retail sales – excluding motor vehicles – fell 8.4 per cent year on year, according to figures released by the Department of Statistics last week.
Total retail sales were higher by 1.4 per cent in August on a seasonally adjusted month-on-month basis. Excluding motor vehicles, they edged up 0.1 per cent on the month.
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