Singapore has one of the highest retail space per capita in Asia. But compared to Hong Kong, RHB says the retail value/sqf is more than 30% lower, which suggests Singapore’s retail space is relatively unproductive.
As it is, retail rental has been on a downward trend since late-2014, along with declining occupancy.
This was also partly due to the substantial increase in retail space supply in 2014.
What is worrying though is that the market has to absorb another substantial increase of about 10% in available retail space during 2017F-2020F.
In 1Q17, retail sales growth in Singapore dipped into negative territory due to weak consumer sentiment.
The growing traction of e-commerce has also provided an alternative to non-store retailing channels, while weak tourist arrivals is another reason.
RHB says there is an urgent need to revive Singapore’s retail scene.
Other than being a significant contributor to Singapore’s GDP and employment, a vibrant retail scene is an important component of the country’s status as a regional hub and an attractive place for talent.
“We believe that retailers and mall owners need to take a collaborative approach to attract shopper traffic, while mall owners should take the opportunity to bring in new or niche retailers to provide greater diversity to shopping malls,” says RHB.
RHB is “neutral” on retail property sector with selective “buys” on Singapore retailers.
The brokerage has “buys” on Frasers Centrepoint Trust (FCT) ($2.22), Dairy Farm (US$10.00), Sheng Siong ($1.21) and BreadTalk ($1.60).
FCT, Dairy Farm, Sheng Siong and BreadTalk are trading at $2.13, US$7.99, $1.005, $1.505.
