Published April 02, 2013

[B][SIZE="5"]Strong demand for strata retail space in Q1: Colliers[/SIZE][/B]

[B]January cooling moves drive investors to commercial sector[/B]

By ong chor hao

THE strata-titled retail sales market saw strong demand in the first quarter of the year as investors turned to commercial properties after the latest round of cooling measures, Colliers International said in a report yesterday.

The average capital values for prime strata-titled retail space in Orchard Road grew 3 per cent from the previous quarter, to $6,806 per square foot (psf).

For regional centres (comprising Woodlands Regional Centre, Tampines Regional Centre and Jurong East Regional Centre), average capital values improved 5 per cent to $4,276 psf.

It said the January cooling measures, which imposed curbs on residential and industrial property, drove "a significant amount of investor interest" towards the commercial sector, which includes shop space.

"Given that retail tenants regularly face rental revisions, coupled with limited existing stock and a low frequency of new launches of strata-titled retail space, there was mounting interest, mainly from investors, as well as from end users."

Colliers highlighted Alexandra Central and Pavilion Square as examples.

All but two of the 116 units at Alexandra Central were sold by the end of the first day of its launch, with units on the first floor fetching more than $7,000 psf. The 93 units at Pavilion Square in Geylang sold out on the first day with prices ranging from $2,000 psf to $10,879 psf; the top price is a record for a retail unit outside the city and the Orchard Road shopping belt.

However, rents for both Orchard and the regional centres fell in Q1 2013, as retailers became more resistant towards rental hikes amid a more cautious consumer sentiment and tighter labour supply in the retail sector.

For 2013, Chia Siew Chuin, Colliers' director of research and advisory, said: "Going forward, should macro-economic conditions remain stable throughout the year, retail rents are expected to stay fairly resilient with the continued momentum of new openings and setups; hence, keeping any downward pressure on rents to within 5 per cent."

As for strata-titled retail sales, it should continue to be fuelled by investor demand, with existing units to benefit as well in terms of price, she believes.

Ms Chia thinks capital values of prime strata-titled retail units in Orchard Road will rise at least 5 per cent, "on the basis that the government does not introduce new property measures that will dampen the commercial sector". This compares with a 4 per cent growth last year.

Non-central areas should see higher price increases, especially if there are new launches of retail units as part of mixed-use developments that can enjoy a ready catchment of pedestrian flow, she said.