Category Archives: Retail

FCT DPU 6% rise on higher rentals

http://www.businesstimes.com.sg/premium/companies/others/fcts-q3-dpu-rises-6-higher-rentals-20140723

BT 20140723 LKFCT233138 1190060

FRASERS Centrepoint Trust (FCT) reported a 6 per cent rise in distribution per unit (DPU) to 3.022 Singapore cents in the third quarter ended June 30, thanks to higher retail rentals and occupancies.

The suburban mall operator enjoyed 7.8 per cent of positive rental reversions in the third quarter over the preceding leases contracted three years ago. Its portfolio occupancy also grew to 98.5 per cent from 96.8 per cent in the preceding quarter.

“We expect FCT’s portfolio occupancy and rental rates to remain sustainable,” said the trust manager’s chief executive, Chew Tuan Chiong. “The outlook for the retail market is expected to remain stable, given the trends in the growing median household income and sustained low unemployment rate.”

Gross revenue for the quarter rose 3.1 per cent from a year before to S$41.2 million and net property income (NPI) improved 2.4 per cent to S$29.1 million.

FCT said that the growth in revenue and NPI was supported by rental step-up of current leases, better rents achieved for new and renewed leases and the maiden contribution from Changi City Point that was acquired on June 16.

FCT’s property portfolio spanning Singapore now comprises Causeway Point, Northpoint, Anchorpoint, YewTee Point, Bedok Point and Changi City Point.

During the third quarter, 41 leases making up 33,623 sq ft or 3.1 per cent of FCT’s total net lettable area were renewed. Causeway Point achieved positive rental reversion of 8.1 per cent; Northpoint, YewTee Point and Anchorpoint achieved positive average rental reversion of 7-8 per cent; while Bedok Point marked a 3 per cent negative rental reversion.

The biggest improvement in occupancies was seen in Bedok Point, where occupancy rose to 99.3 per cent from 77 per cent in March, after several new tenants, including anchor tenant Harvey Norman, opened in fiscal third quarter.

FCT’s gearing ratio rose to 30.2 per cent as at June 30 from 27.7 per cent as at March 31, after it drew down on an unsecured term loan of $150 million on June 16 to part-finance the acquisition of Changi City Point.

Units of FCT rose one cent to close at S$1.965 yesterday. The ex-date for the declared distribution is July 29 and it will be paid on Aug 29.

Office rents up in Q2

Sgbayhomes office

http://www.businesstimes.com.sg/premium/top-stories/office-rents-52-so-far-further-surge-expected-year-20140726

WHILE retail rentals have proved fairly flat so far this year, office rentals have been on a roll. They have already risen 5.2 per cent in the year to date, outpacing the 1.3 per cent full-year growth last year – and are likely to continue going up.

Analysts expect prime Central Business District (CBD) Grade A office rents to surge further by 7-15 per cent for the rest of the year, as tenants jostle for limited options amid a dearth of office space supply.

URA data released yesterday showed office rentals rising 2.8 per cent in the second quarter of this year – the highest quarterly growth in more than three years, and coming on the heels of a 2.4 per cent increase in Q1.

Rentals for offices in the Downtown Core (the CBD, City Hall, Bugis and Marina Centre zones) and the Orchard Planning Area registered a more pronounced increase of 3.2 per cent to a median S$10.03 per sq ft (psf) a month in Q2 – above the “psychological benchmark” of S$10 psf.

No office projects were completed in the CBD in the quarter, and there will be none soon as well – at least until CapitaGreen in Market Street is completed in December.

In fact, no CBD offices are expected to be ready until 2016, which is when three developments – Guoco Tower, Marina One, and Duo – come onstream. Not surprisingly then, vacancies fell from 10 per cent in Q1 to 9.6 per cent in Q2, and rents rose.

Savills Singapore research head Alan Cheong said: “During lease negotiations, the pendulum has swung in favour of landlords and caused signing rents to move closer to the asking rents.”

And tenants who seek smaller space tend to pay higher psf prices, partly also because they have less clout to bargain, he added.

This is all playing out against a backdrop of a global economy that has got on a more solid footing, creating a better business climate, which has in turn paved the way for more firms to ramp up growth plans, thus generating more demand for office space

R’ST Research’s director Ong Kah Seng said: “Office rents have been on a downward trend for the past two years post-financial crisis, so we are seeing some laggard rental recovery this year, in sync with the global economic recovery.”

Contrary to the upward trend in rents, however, the prices of office space – which is not so much a function of supply as it is a function of investment activity – stayed unchanged in Q2, following a 0.5 per cent increase in Q1.

CBRE research head Desmond Sim suggested that this could be because transactions in the quarter changed hands at market value, and so did not push up capital values.

Chia Siew Chuin, the director of research and advisory at Colliers, attributed this to a lack of new strata-titled office project launches in Q2.

Most office and retail space transactions tend to be of strata-titled units, rather than investment sales of a few floors or en bloc sales of entire buildings.

“The continued enforcement of the total debt servicing ratio (TDSR), which caps buyers’ loans, and concerns of an impending interest rate hike weigh on the ability of strata-titled office owners to significantly raise prices during the quarter,” Ms Chia said.

But she warned that the impending tightening in global liquidity could cause financial stress in open and trade-dependent markets like Singapore’s, and that some firms could hold back from expanding if rental costs accelerate at an unsustainable pace.

In retail space, rents rose by 0.6 per cent in Q2, after falling 0.3 per cent in Q1, so they essentially plateaued in the first half of 2014. URA’s index tracks base rents with gross turnover component for those to whom it is applicable.

Landlords may have become more careful with raising rents, now that they are under scrutiny; they also do not want to price themselves out of the market as retailers grow more resistant to rental increases, said CBRE’s Mr Sim.

Prices of retail space fell 0.3 per cent in Q2 after having stayed unchanged in Q1, similarly restrained by buyers’ loan restrictions.

“In the space of a year, the strata-titled retail sales market has had the wind dramatically taken out of its sails,” said Colliers’ Ms Chia.

Some 190 units changed hands in the first half, nowhere near the dramatic 642 transactions a year ago, pre-TDSR.

Most expect retail sales to stay flattish, or increase at inflationary levels at best, for the rest of 2014.

URA office and retail indices do not cover the whole island, but only 22 planning areas in the central area, including Downtown Core, Orchard, Marina East and South, and in fringe areas such as Newton, Outram, Bishan, Geylang and Queenstown.

Analysts like R’ST Research’s Mr Ong took issue with this, arguing that the suburban shopping sector was as active, if not more so, and that offices are decentralising and moving to locations outside the CBD. Much of the action in these two markets are not currently reflected in the data, he said.

Singapore’s retail rents inch up in Q2; Office rents in Singapore continue to rise: URA

http://www.businesstimes.com.sg/breaking-news/singapore/singapores-retail-rents-inch-q2-ura-20140725

RETAIL rents in Singapore rose 0.6 per cent in the second quarter, against a decline of 0.3 per cent in Q1, the latest property indices released by Urban Redevelopment Authority on Friday morning showed.

Prices of retail space dipped 0.3 per cent quarter-on-quarter in Q2 2014, after remaining unchanged in the first three months of this year.

The islandwide retail vacancy rate stood at 5.9 per cent at the end of Q2 2014, slightly higher than the 5.8 per cent at the end of Q1.

By the end of Q2 2014, there was total supply of 879,000 sq m gross floor area of retail space from projects in the pipeline.

http://www.businesstimes.com.sg/breaking-news/singapore/office-rents-singapore-continue-rise-q2-ura-20140725

OFFICE rents in Singapore continued to rise, climbing 2.8 per cent in the second quarter following the 2.4 per cent increase in the first quarter of this year.

According to data released by the Urban Redevelopment Authority (URA) on Friday morning, prices of office space remained unchanged in the second quarter compared to the preceding quarter, which saw a 0.5 per cent rise.

The island-wide vacancy rate of office space at the end of Q2 fell to 9.6 per cent, from 10.0 per cent at the end of Q1 2014.

The amount of occupied office space rose 22,000 sq m (nett) in Q2 2014, compared to the 6,000 sq m (nett) rise in Q1.

Prices of office space flat in Q2 after a 0.5% increase in Q1; prices of retail space fell 0.3 % after remaining unchanged in the previous quarter.

http://www.channelnewsasia.com/news/singapore/prices-of-office-retail/1281694.html

Sgbayhomes office

Prices of office space were flat in the second quarter after a 0.5 per cent increase in the first quarter, while prices of retail space fell 0.3 per cent after remaining unchanged in the previous quarter, the Urban Redevelopment Authority (URA) said on Friday (July 25).

Rental prices of office space in the second quarter rose 2.8 per cent from the previous three months, following the 2.4 per cent increase in the first quarter. Rental prices of retail space in the second quarter also increased, rising by 0.6 per cent in the second quarter, compared with the decline of 0.3 per cent in the January to March period.

As of end-June, there was a total supply of about 1.055 million square metre (sqm) gross floor area of office space in the pipeline, and a supply of 879,000 sqm gross floor area of retail space from projects in the works.

The amount of occupied office space increased by 22,000 sqm in the second quarter, compared with the 6,000 sqm increase in the previous quarter. During the quarter, the stock of office space decreased by 1,000 sqm, compared with the increase of 15,000 sqm in the previous quarter. As a result, the islandwide vacancy rate of office space at the end of June fell to 9.6 per cent, from 10 per cent at the end of March.

According to URA, the amount of occupied retail space increased by 38,000 sqm in the second quarter, while the stock of retail space increased by 49,000 sqm. As a result, the islandwide vacancy rate of retail space rose to 5.9 per cent at the end of June, up from 5.8 per cent at the end of March.

Burlington Square

BSQ 6 BSQ 5 BSQ 1

Address: 175 Bencoolen Street
Type of Development: Apartment / Commercial
Tenure: 99 years
District: 07
No. of Units: 179
Year of Completion: 1998
Developer: Wintrust Investment Pte Ltd (WingTai)
Unit sizes:
Studio: 667 sq ft
2 bedrooms: 861 – 990 sq ft
3 bedrooms: 1,119 – 1,350 sq ft
Penthouse: 3,035 sq ft

Burlington Square is primarily used for Office rental and sale. Burlington Square is close to Bugis MRT Station (EW12) and Bras Basah MRT Station (CC2). Upcoming new MRT station Rochor Station (DT13) will be less than 2 minutes walking distance from it.

It is near to several bus stops located opposite Burlington Square – 07517, after Sim Lim Square – 07531 and at Fortune Centre – 07518.

 

Condo Facilities at Burlington Square

Facilities are full and include covered car park, 24 hours security, swimming pools, BBQ pits, gym, tennis courts, steam bath, and a multi-purpose hall. Some units have roof gardens and there is also a communal viewing terrace that offers residents an outstanding view of the city skyline.

 

Amenities Burlington Square

Reputable schools such as Laselle College of the Arts and Singapore Management University are both within walking distances.

Cinema, restaurants and eating establishments, supermarkets, and shops are located at the nearby Bugis Junction Shopping Centre. Residents can go to the neighboring Sim Lim Square for a range of computer and electronic products at competitive prices.

Numerous other restaurants and eating establishments are scattered around the development. In addition, there are numerous pubs and bars located at Selegie Road, which is a stone’s throw away. Burlington Square has several eateries located within its buildings such as Café Lyubi Menya and Burger King Fast Food Restaurant.

Attractions like Fort Canning Park and Little India are just around the corner and interested residents can scour through the huge collection of books and electronic media available at the nearby 7-storey Singapore National Library.

For vehicle owners, travelling to the business hub and the buzzing Orchard Road shopping belt takes about 5 minutes, via Victoria Street and Bukit Timah Road respectively.

Burlington Square is within reasonable distance to NTUC Fairprice Supermarket. It is also an array of amenities such as grocery, retail shopping, banks and more.

Burlington Square is accessible via Bencoolen Street, Rochor Road and Jalan Besar.

 

Textile Centre

TC shop details2

 

TC1

Address: 200, Jalan Sultan, 199018
Type of Development: Commercial (Office/Retail)
Tenure: 99 years
District: 07
Year of Completion: 1974

Textile Centre is primarily used for Office rental and sale. Textile Centre is close to Nicoll Highway MRT (CC5) and Lavender MRT (EW11). It is near to several bus stops located at Jalan Sultan, Sultan Plaza – 01239, Jalan Sultan, Opp Textile Centre – 01231, Beach Road, Jalan Sultan Complex – 01411 and Beach Road, Saint John Headquarter – 01419.

Amenities near Textile Centre

Textile Centre is also within walking distance to the stretch of eateries and restaurants located at Jalan Sultan. Residents can head down to the nearby Bugis Junction shopping mall for amenities such as supermarkets, restaurants, banks, cinema, boutique shops, and more.

Textile Centre is within reasonable distance to Shop N Save, Cold Storage, Sheng Siong and I-Tec Supermarkets. It is also close to The Concourse Shopping Mall, Golden Landmark Shopping Complex, Sim Lim Tower, Bugis Point, Fu Lu Shou Complex, Parco Bugis Junction and Albert Complex.

Textile Centre is accessible via Jalan Sultan and North Bridge Road.

A few feeder bus services are available near Textile Centre. It is also close to several schools, such as Singapore Management University(SMU), Nanyang Academy of Fine Arts(NAFA), and Laselle College of Fine Arts.

For vehicle owners, driving from Textile Centre to either the business hub or the buzzing Orchard Road shopping district takes just above 10 minutes, via North Bridge Road and Bencoolen Street respectively.

BT: Non-residential deals to remain active

http://www.businesstimes.com.sg/specials/property/non-residential-deals-remain-active-h2-20140715

Non-residential deals will continue to drive investment activity in Singapore for the rest of this year, given faltering sales in the tepid private residential market, DTZ said in a report yesterday.

The report found that overall real estate investments fell around 11 per cent from the previous quarter to $4.4 billion in Q2.

And although non-residential investments (particularly offices) drove the volume, they too fell 6 per cent to $2.9 billion on muted transactions in the hospitality and mixed-use sectors.

At least six big-ticket non-residential property deals were concluded in Q2.

In the commercial sector, three office properties – Prudential Tower, Equity Plaza and Cecil House – all along Cecil Street in the central business district, were transacted. A consortium of Far East Organization, Far East Orchard and Sekisui House also beat seven others in a government land sales tender to clinch a 99-year-leasehold commercial site on Woodlands Avenue 5/Woodlands Square for $634 million.

In retail, Frasers Centrepoint Trust acquired Changi City Point at Changi Business Park for $305 million; in Industrial, Ascendas Reit bought Hyflux Innovation Centre at 80 Bendemeer Road for $191 million.

The transactions in Q2 brought the total investment volume in the first half of 2014 to $9.4 billion, 17 per cent lower than the same period last year. It also looks on track to achieve the earlier forecast of $20-25 billion for the full year.

Property companies and real estate investment trusts (Reits) were the main drivers of activity in Q2. Property companies were the largest buyers, accounting for $3.1 billion or 71 per cent of investment activity.

Reits were also very active, but their divestments of $512 million exceeded their acquisitions of $496 million, making them net sellers in Q2. This is expected to reverse in Q3, though. Acquisitions are likely to be boosted by the listing of Frasers Hospitality Trust.

The trust’s initial portfolio will comprise six hotels and six serviced residences, including two – InterContinental Singapore and Fraser Suites Singapore – located in Singapore. Both will be injected for a combined value of $824.1 million.

Swee Shou Fern, DTZ’s director of investment advisory services, expects Reit and developer acquisitions to continue supporting investment activity going forward.

“As global real estate markets start to improve, investors and funds are becoming more positive about the performance of the real estate . . . market. This could see them increasing their allocations to real estate and Singapore could benefit, being one of the most liquid markets in the region,” she said.

A Colliers report released last week turned up similar findings and projected similar trends.

It blamed the slump in residential investment sales on “the double whammy of frail investor interests in en bloc and strata-titled properties, as well as anaemic developers’ quest for land acquisition via collective sales”.

“In the next six months of the year, sales emanating from (government) land sales are forecast to stay subdued. On the private sector front, the collective sales market will likely remain depressed as the same factors that have kept it at a standstill will continue to play out in the months ahead,” it projects.

The consultancy expects interest in commercial properties to gather pace, backed by a steadily recovering office rental market.

“In addition, small and mid-sized family offices or single family offices are increasingly shifting their asset allocation towards property-oriented investments, particularly that of good quality office buildings that have potential upside in yield and capital appreciation. More of such deals can be expected to be sealed in the coming quarters,” it said.

Retailers free to choose Reit or non-Reit landlords

mall owners types

Retailers do have the freedom of contract to choose which type of landlord to lease space from, be it shopping malls owned by real estate investment trusts (Reits), developers, property funds, or small-time owners of strata unit stores, industry watchers say.

This freedom weakens the validity of their grouses that Reit-owned malls are imposing too-steep rental increments and injecting too many unfair terms into lease agreements. They have the option of renting from another mall owner with less onerous terms.

That said, their options may soon narrow in future, as other categories of landlords begin to adopt the business practices used by Reits and some property funds. At the same time, the choice of available landlords is also shrinking as more malls previously in the hands of other landlords now come under the control of Reits.

One main gripe retailers have is the harsh terms and conditions included in lease agreements, such as having to pay a significant chunk of their turnover (25 per cent, for instance, is deemed insurvivable for business) together with the base rent.

Other such terms include possible eviction if a minimum sales target is not met, short notice needed to be given for tenants to vacate a space, as well as the landlord not having to compensate the tenant if he decides to redevelop the building and relocate the latter.

“Every lease agreement has some of these things,” noted Douglas Benjamin, chief operating officer of FJ Benjamin Holdings, an international luxury and lifestyle brand retailer.

But while these sorts of contractual terms are deemed unfair to retailers, they are not regarded as anti-competitive, according to Burton Ong at the National University of Singapore law school. “They don’t harm competition, they just make life very difficult for the tenants,” he said.

There is not much relief for retailers looking to get out of these “harsh and one-sided” contracts, partially due to their insufficient bargaining power and simply put, because “they entered into these agreements eyes open”, he added.

It is also unlikely that any legal avenue for smaller retailers seeking relief from onerous contracts will be set up any time soon, because it will appear inconsistent with the pro-business environment the Singapore government is trying to maintain, he said.

Associate Professor Ong thinks that the troubles plaguing retailers are an inevitable part of operating a business in a capitalistic market-based economy.

“Parties are expected to look after their own interests, even when up against another party with much stronger bargaining power. Freedom of contract means the tenant is free to choose if he wants to accept these terms or look elsewhere.”

Retailers couldn’t hide their turnover even if they wanted to. Some malls, especially those owned by major retail Reits, harness a point-of-sale system, where each time the cash register is rung up, sales data is captured and fed to the landlord’s computer system.

Mr Benjamin concedes that Reits are just doing their job: “There’s no need to vilify the Reits particularly, they’re doing what they’re mandated to do, which is to get the best returns for their shareholders, and every business has to do that.”

To be sure, Reits are also finding it increasingly difficult to compete, said DTZ’s SE Asia chief operating officer Ong Choon Fah.

They may enjoy a great headstart over developer-owned malls (the recent trade ministry study showed that rents grew 20 per cent at Reit malls between 2009 and 2013, compared to 9.2 per cent for single-owner malls on a compounded annual growth rate basis), but they are their own greatest enemy.

“In a way, Reits are a victim of their own success, because they always have to compete against themselves, to how well they did last quarter,” said Ms Ong.

Part of the reason for Reits’ active management of their malls is that they have to account for what they have done, to investors every quarter. Also, because every square foot is a revenue generator, Reits tend to squeeze returns – both rental and advertising – from their space.

The difficult part, says Chew Tuan Chiong, CEO of the manager of Frasers Centrepoint Trust, is finding that equilibrium – how much you can increase the leasable floor area by without resulting in clutter or deteriorating the shopping experience; how much rent to charge tenants so that they will stay and the Reit can still distribute a decent return to unitholders.

“It’s actually the equilibrium that we are striving at. It makes no sense for us to charge too high a rent and change tenants too frequently because there is downtime every time there is a tenant change. Our objective is to help tenants succeed because if they don’t do well, it affects us too. The relationship between landlord and tenant is quite symbiotic.”

Yet, it has come to this: that retailers’ rental and manpower woes have turned them cautious about expansion. FJ Benjamin is relooking which stores to keep and which to give up for profitability or strategic reasons, while restaurant chain The Rotisserie said it will relook its outlets when it is time to renew their leases.

But are there really as good non-Reit alternatives out there, and can they be effective substitutes?

DTZ’s Ms Ong believes that some developer- owned malls can be as well managed as Reit malls, with less traffic but higher conversions to sales. She cites the example of Allgreen Properties’ Great World City, favoured by shoppers for its good tenant mix, expanse of space and slower pace.

As for strata-titled malls, they can sometimes work for certain target groups, as in the cases of Lucky Plaza and Queensway Shopping Centre. “Sometimes people also want to go somewhere a bit disorganised, so there’s an element of surprise,” Ms Ong said.

At least 600 “more promising lots” of new strata shops in mixed development projects are scheduled for completion in the next couple of years, which may reverse the image of strata malls as small-sized, drab malls lacking in diverse retail offerings, said R’ST Research director Ong Kah Seng.

http://www.businesstimes.com.sg/premium/top-stories/retailers-free-choose-non-reit-landlords-20140707

Click to access BT_20140707_LMXOWNERSHIP_1164281.pdf

Retail rents to hold up

According to yesterday’s Business Times, Retail rents may either hold or inch up over the next few years despite new supply coming onstream. This is supported by a healthy demand for retail space and the fact that rents tend to be “sticky” in nature, property analysts say.

This projection provides cold comfort to retailers looking for a breather from rising business costs. It also goes against the government’s hopes of easing rents with its estimated 600,000 gross square metres of retail space supply from 2014 to 2016.

JLL head of research for Singapore and South-east Asia Chua Yang Liang believes that retail rents will remain stable in the next three years, supported by healthy pre-commitment levels in recently completed malls and for the uncompleted pipeline.

For instance, Orchard Gateway recently opened with nearly full occupancy while the soon-to-be completed refurbishment of Shaw Centre has secured 90 per cent commitment.

“Vacated spaces have been quickly taken up as evidenced by Metro’s takeover of Robinson’s former 130,000 sq ft premises at Centrepoint, which is poised to be completed by the fourth quarter,” Dr Chua said.

In the suburban areas, retail rents are also expected to hold up, even though a good 65 per cent of the estimated 4.1 million sq ft of new net lettable retail area to be rolled out by 2016 will be located in these regions, while only 7 per cent of the supply will be in the Orchard/Scotts area, said DTZ’s regional head (SEA) of research, Lee Lay Keng.

“Upcoming malls such as The Seletar Mall and One KM have reported healthy pre-commitments while there are still retailers looking at expanding in the suburban malls to tap the population living in nearby housing estates,” she said.

Analysts expect prime retail rents in the Orchard/ Scotts Road area to rise in the next three years given limited new supply there. Maybank analyst Ong Kian Lin estimates that Orchard Road prime retail rents will grow 2.5 per cent from 2014 to 2017 on a compound annual growth rate basis.

Suburban malls enjoy higher footfall than some prime luxury malls on Orchard Road, possibly because residents frequent the former more for necessity shopping, he observed. But the conversion rate of footfall to sales is higher at Orchard Road malls, which are more patronised by tourists.

The gap between Orchard Road and suburban mall rents has also narrowed over the years, said Savills Singapore research head Alan Cheong. Monthly rents (without the percentage gross turnover portion) for prime retail space in Orchard Road and suburban malls averaged $34.60 and $31.10 psf respectively in the first quarter.

Mr Cheong noted that grouses by retailers over high rents stem from a disconnect between declining sales and a stubbornly high rental base. Retail rents here typically consist of a base rent and a percentage of gross turnover, so a decline in sales of a tenant should translate to lower rent paid to the landlord. Yet, rents have not budged for some retailers.

Douglas Benjamin, chief operating officer of FJ Benjamin Holdings, an international luxury and lifestyle brand retailer, said: “It’s fair if you are in a mall where business is good and the landlord wants to increase your rent. But if your sales have fallen, maybe because another mall has opened next door, it doesn’t make sense for your landlord to want to raise rents.”

But a study by the Ministry of Trade and Industry (MTI) showed that for most of the renewals in 2012 and 2013, the effective increase in rent per annum was in line with inflation over the period of their lease. Growth in retail rents in the core downtown and city fringe areas was also flat in Q1 compared to a year ago, according to the URA rental index.

But rentals for prime spaces islandwide tracked by Knight Frank, which looked at more comparable units of 350-1,500 sq ft with the best frontage, connectivity, footfall and accessibility, were relatively resilient. Rents for such spaces rose 1.9 per cent in the first quarter from a year ago, driven by higher rents for such spaces in Marina, City Hall and Bugis.

Apart from rents, retail businesses are contending with higher labour costs, tighter foreign workerpolicies and a strong Singapore dollar. The growth of e-commerce is also eating into the sales pie of brick-and- mortar retailers, consultants say.

“We believe that over time, online shopping will be a game changer and unless one is talking about the very high-end products or those where personal service is still deemed irreplaceable, the rest of the retail industry will undergo major structural changes,” Mr Cheong said.

“Only food and beverage may for now survive but there is a limit to how much space a landlord can convert to F&B use,” he added. “Therefore, we believe that it could be online shopping, working through the demand side, rather than increased supply that will ultimately bring down rents.”

Ms Lee of DTZ, however, downplayed the impact from e-commerce. “There will still be consumers who seek the wholesome retail experience of seeing, touching and trying on their goods before they buy,” she said. More online retailers such as blog shops are also setting up physical shops, she added.

http://www.businesstimes.com.sg/premium/top-stories/retail-rents-hold-despite-supply-20140707

In a separate report, Rents have been a sticky issue for retailers, even though consecutive data released lately shows that retail rents have eased and will be capped by the upcoming supply in retail space.

Retailers decry that rents have not factored in their declining sales. This runs contrary to the fact that most lease agreements have a variable rent component based on gross turnover (GTO).

Most landlords here, except for strata-titled owners, charge their tenants a base rent and a percentage of GTO. The rent structures vary across tenants and locations. Some tenants pay both a base rent and a turnover rent of 0.5-2 per cent; others pay by either that formula or purely turnover rent of 10-20 per cent – whichever is higher. There are other permutations in the rent calculations.

Whatever the case, having a turnover rent as part of the total rent computation should have made overall rents more susceptible to the revenues of retailers.

http://www.businesstimes.com.sg/premium/top-stories/why-retail-rents-are-still-sticking-point-20140707