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New brands more hesitant about diving into Singapore's retail market

Rising costs, challenges in hiring retail staff and a lack of prime retail space are some of the factors making new brands more cautious about launching in Singapore. 

SINGAPORE: Leasing activity in retail malls in Singapore remains healthy, but some property analysts point to signs that the rate at which new tenants sign up has slowed down since the end of 2013.

Factors at play include the lack of prime retail space and the challenging operating retail environment, with retailers facing rising costs and shrinking profits. With tighter foreign worker policies, they are also having a tougher time hiring staff.

Mr Kesri Kapur, honorary treasurer of the Singapore Retailers Association, believes the situation is definitely tougher for smaller brands. He said: "We have seen that smaller brands which can't stand on their own feet definitely look for the exit. Singapore is still a place where it can be a face for a brand, at least in the regional context. I do anticipate more brands to look at Singapore, but the inflow will reduce significantly compared to a few years back."

RETAILERS NOT EXPANDING AGGRESSIVELY

Property consultancy JLL said retailers in Singapore are not expanding aggressively these days, and some are even consolidating outlets that are not performing well. While there is some interest from new brands looking to set up shop in Singapore, they are not quick to commit themselves.

Ms Lee Siew Ling, director of retail at JLL, said: "In the past, when they come to Singapore, they will say that they want to open three stores, five stores, 10 stores. Now they say maybe they will open one, two or three, or see how it goes.

"They are a lot more selective and cautious, it is a more calculated approach. They are looking at specific locations only. If these are not available or not available at a rent they feel is palatable, they are not so willing to jump into it readily."

JLL said that overall, shopping malls in prime locations still enjoy a healthy waiting list of prospective tenants. "Paragon is still doing pretty well. ION Orchard, Ngee Ann City, Marina Bay Sands, VivoCity as well - all these malls enjoy a pretty high foot fall," said Ms Lee. 

LANDLORDS NOW MORE PROACTIVE IN MANAGING TENANCY MIX

Amid the tougher retail environment, Colliers International said landlords are becoming more progressive and proactive in managing their tenancy mix, to offer a wider variety and a more positive shopping experience.

Mr Calvin Yeo, deputy managing director of Colliers International, said: "Given the current trends, you need in your mix a fast-fashion component, a mid-luxury component depending on your location, and of course luxury and F&B. We are seeing an increase in the F&B component - up to 30 per cent of the floor area in malls is now dedicated to F&B."

In the second quarter of 2014, retail rents remained largely unchanged. According to the latest Colliers report, the average monthly gross rent of prime retail space in Orchard Road declined 0.2 per cent to S$36.42 per square foot, while that of the regional centres rose 0.3 per cent to S$33.61 per square foot.