Against the backdrop of weaker retail spending amid the softened global and local economy, more tenants are looking to downsize and consolidate their businesses. Average monthly island-wide prime retail rents slipped 0.2% q-o-q to $31.20 psf in 3Q2016, according to Knight Frank’s latest Singapore retail bulletin in 3Q2016.

On the back of the tougher retail climate, average Orchard Road prime rents fell 0.5% q-o-q to $35.10 psf in 3Q2016. It is the first decline since 2Q2015.

Suburban prime rents increased 0.1% q-o-q to $29.50 psf in 3Q2016. It is largely attributed to the stable demand from the surrounding residential catchment.

Meanwhile, prime rents across Marina Centre, City Hall and Bugis, and city fringe stayed flat at $31.40 psf and $24.70 psf respectively in 3Q2016.

Knight Frank reckons that it is important for landlords to perform a critical review of their mall positioning and tenant mixes. New and refreshing concepts are needed to drive excitement among consumers. Retail malls have to offer a differentiated and experiential shopping experience in order to attract shoppers as well. In addition, there is also a growing emphasis on customer service to earn shoppers’ loyalty.

Knight Frank expects the challenging retail landscape to moderate the rents further. In addition, retailers have taken a cautious stance towards business expansion. Island-wide occupancy is likely to fall from 92.8% in 4Q2015 to between 90.0% and 92.0% in 4Q2016.