Retail and F&B sectors set for higher growth even as rental goes up

Retailers bagged good sales in the first half of this year and the trend is set to continue.

However, analysts say strong demand for prime retail space is likely to push rentals up by some five percent over the next 12 months.

Consumers spent some $24b on shopping, and food and beverage last year.

Retail sales was up by nearly 8 percent compared to 2004, while F&B spending rose by 2.8 percent.

This is largely due to tourism arrivals, healthy economic growth and high employment rate.

The retail sector is expected to do well again, with sales rising by 5.3 percent in the first half of this year.

Large malls like Vivocity have also provided much needed retail space.

Most shopping complexes are almost fully leased and analysts forecast an increase in rental due to the high demand.

However, more space will be made available – about 7.2 million square feet or the equivalent of 7 Vivocities will be rolled out by 2009.

“Singapore currently has 7.8 square feet in terms of retail per capita and that is one of the lowest amongst Asia. The government is promoting the tourist arrivals, and as such we do not foresee a situation of oversupply,” said Mavis Seow, Director, Retail Services, CB Richard Ellis.

However, Ms Seow added that there is a “demand issue”, because the best brands are being held by a few key retailers in the market, and there could be a possibility of a tussle amongst landlords to fight for the better brands.

Property owners are also setting aside more space for F&B use, from 12-15 percent of total space in the past, to 20-25 percent presently.

Spending in the sector grew 4.5 percent in the first half of the year.

The retail scene has also evolved.

There are more small specialty shops and street level shopping, and analysts say such retailing formats will encourage youngsters to set up their own business and give larger departmental stores something to think about.

“For the departmental stores to refocus,they could introduce new overseas brands not yet into the market, or could make the specialty shops sharper in terms of design layout instead of putting all the brand names together,” said Ms Seow.

Going forward, industry watchers say re-invention is the key to keep shoppers coming back.

Late night shopping or converting old historical buildings into malls could also spice up the retail experience.

Source: Channel NewsAsia, 11 October 2006

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