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No.14 Scotts Road #05-134(B) Far East Plaza Singapore 228213  Tel: 67326266 HP: 96736477   Fax: 67325132 
Email:enquiry@fareastplaza.com

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Charles Yue  H/p: 9673  6477 
 3
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Charles Yue 

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                  Newsletter on Far East Plaza             

             By Charles Yue 
             Jul - Sep 2015 Series N74

 

A ) THE RENTAL MARKET.

 

Most shoppers will observe that since beginning of 2015, there have been a distinct and deteriorating shop vacancy rate all over Singapore. Those owned and managed by singly-owned developer or the Real Estate Investment Trust (REITS) may have lesser vacancy rate as the 'REIT Managers' can revamp and adapt to the tenant mix according to the change in market demand and lifestyle patterns.

 

The Reit Manager can allocate quota for the actual trade mix, like how many nails or hair salons or I.T. & electronics shops allowed in the malls, to shift certain trades to various floors and not to renew the lease to certain tenants so as stay relevant and position the malls to have the most comparative advantage in comparison to other competing malls.

 

In fact, the monetary and economic value of retail space and malls is very much enhanced by management-centric skills to generate cash flow and capital value. Other important market conditions include the site location, the catchment hinterland and the demographics of the population.

 

Strata-titled shopping centres have the Management Corporation (MCST) to manage and upkeep the premises. As market correction is going on, the MCST must play a pro-active role to help the strata-titled proprietors to maintain and promote the marketing and sales activities. But many such MCSTs in Singapore are unable to do so for various reasons such as fund constraint amid the need to maintain adequate fund to maintain the building or differing views from different proprietors resulting in difficulty in arriving at a common decision. 

 

The individual investors can also tap and benefit from the retail property sector by owning strata-titled lots in shopping areas.   As  most    people


PRECAUTIONS TO BE TAKEN BY LANDLORDS:

Landlords could take pre-emptive steps to balance up the potential loss scenario by taking temporary measures like:

 

1) Try to accommodate the tenant's short

term business difficulty

 

2) As far as possible, try not to let the shop 

space be empty as Landlords would still have to pay for the monthly cost for property tax and maintenance charges ( $400 to $ 1500 a month depending on the Annual Value and the MCST maintenance charges on a per sq foot basis based on 300 sq ft shop ).

 

THE  GROUP OF PEOPLE  MOST VULNERABLE.

 

 RETIREES.

Over the last 20 years, the rental market have been stable and rent have been rising consistently. Retirees have enjoyed incremental income to plan and finance their aspiring lifestyles.

 

Currently, rent is dropping, while a large sum of money goes to paying the property tax and the monthly maintenance and service charges. The Retirees will be greatly affected when the rental income drops, when tenants defaulted or ask for rental discount when the tenancy agreement has already been signed and the risk of the shop being vacant for months.

 

There is a possibility that the Retirees' income may drop when vital decision was not properly made to protect from the deteriorating situations.

 

MARKET CORRECTION ALSO BRINGS IN NEW TENANTS AND NEW LIFE.

 

In the past, many aspiring and potential tenants will put off from renting because of the high rent

 

pastimes revolve around air-conditioned malls and the ambience it provides, owning a shoplot can be profitable and desirable investment. This sector has very limited supply as most new shopping malls are singly owned and managed by one corporation or party to enhance and generate cash flow to build up capital value.

 

Over the last 30 years, we have seen retail property value gone up by many folds, with some appreciating more than 10 times or more. In fact, owning retail property have been good till now.

  

 Why and what are the reasons for the current  vacancy phenomenon? 

 

1) Some tenants are losing money as sales have dropped because shoppers are not coming in to the malls. E-commerce, changing life-style and drop in purchasing power and the loss of the wealth-effect may have contributed to this deficit.

 

2) Some tenants cannot cover the operating cost after paying for rental and manpower cost from  their  regular clientele and they did not manage to replace with sufficient fresh walk-in or new customers.

 

3) More new shopping malls supply and some tenants' inability to pay rent have resulted in excess shop supply, stubborn vacancy, and drop in rental rates, especially when the shops remain vacant for months.

With this market correction, many young entrepreneurs,   experienced      and   seasoned

retailers are coming in to rent at the much reduced rental rates.

 

A rejuvenating cycle of new tenants with new ideas and retailing concepts will fill up the missing gap on those who leave. If such transformation is fast and smooth, the shopping malls' ambience and retailing activities will be lively and refreshing.  

 

 

B) THE SALES MARKET.

 

The retail property sales market has seen few sales made to-date in 2015. Based on a search on 15th June 2015, the shops transacted in Far East Plaza, Lucky Plaza and Sim Lim Square is 2, 2, and 2 respectively.

 

There are many choices of investment for investors and some are thinking that the sale price will drop further as the rental market and yields are adjusting downwards to reflect on the property cycle.

 

Investors will consider factors like the current and potential yields and rental rates, shop state of the economy and opportunity cost compared with other investments.

 

Evaluate the possible solutions to minimise loss of rental income and rental default. Discuss with us (the professionals) on how best to respond as every decision's choice has its pros and cons and some consequences may be painful and can hurt financially and emotionally.

 

Please call us at HP 96736477 for a confidential discussion on the optimal decision to solve any foreseeable problems or ask for an estimate of the latest market price for rent or sale

 

 

Charles Yue (Charlie) : 6732 6266   Fax: 67325132

www.fareast-plaza.com    Email:enquiry@fareast-plaza.com

14 Scotts Road #05-134 (B) Far East Plaza Singapore 228213

 

 

 

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