Oversupply of condo retail shops
The high-density cities in Asia have had retail units on the street
level units of their mid-size and tall residential towers years before
they became known in Toronto. As this report shows, retail on the
bottom floor of condos, can be too much of a good thing.
Concerns
over oversupply of strata-titled retail shops
Channel NewsAsia
By Wong Siew Ying
30 September 2014
SINGAPORE: More than 1,000 strata-titled retail shops are estimated to
be completed in Singapore over the next 12 months. According to
consultancy Chestertons, this will account for 42 per cent of the
supply pipeline between now and 2019.
The concern is whether there is enough retail demand to absorb the
supply, particularly units that are not well located.
In recent years, there have been more mixed-development projects being
built - with residential and retail components. A good number of these
shops are strata-titled or independently-owned. One key issue with such
properties is that there is no control over tenancy mix.
Chestertons said that according to estimates, strata-titled retail
shops will account for about 15 per cent of the total retail space
available by 2019. Of these, 345,000 square feet or about 1,300 strata
units are expected to be completed in the next 12 months.
SLP International Property Consultants said some upcoming projects with
strata shops include Alexandra Central, City Gate, Eon Shenton, NeWest,
Junction Nine/Nine Residences and The Promenade@Pelikat.
More investors buying strata shops
Many investors started buying strata shops in the last two to three
years after the Government implemented more cooling measures on the
residential property segment.
Analysts said some of these investors may not fully understand what
they are buying into, as the considerations are quite different from
buying an apartment. Considerations include location, accessibility via
public transport, size of the population catchment, unit mix and
location of unit within the mall, as well as the type of tenants there.
Mr Donald Han, Chesterton's managing director, noted that most of the
buyers are not owner-occupiers and have purchased properties with the
sole purpose of renting them out.
"And if they have bought a development that is not close to any
amenities or any employment hubs or not near the MRT, for instance,
they will probably be caught between a rock and a hard place. Some of
the smaller malls may not be able to compete with the larger malls.
Another reason why smaller malls may not do well is lack of car
parking," Mr Han said.
Possibility of offering niche services
Still, some analysts said that over time, the collection of shops could
evolve to offer niche services or products, much like successful
strata-titled mixed developments like Far East Plaza and Queensway
Shopping Centre, for example.
Said Mr Desmond Sim, head of Research Singapore at CBRE Research:
"These shops available in the market could present some opportunities
for SMEs (small and medium enterprises) or smaller entrepreneurs who
might think that the bigger malls present a very high occupancy cost.
They might take advantage of presumably lower rentals offered by the
huge supply that is coming up, to take up space there and create a
niche of their own."
But others suggest that the Government could look at new restrictions
for developers on strata-titled sale for certain sites in its land
tender.
"They may have to stipulate conditions like, for example in the first
10 years after the project is completed, they are not allowed to be
strata-titled and sold. So in this way, the single company has to own
and manage the development. Most likely, this company would be an
experienced shopping centre operator and we could see a better quality
shopping mall," said Mr Nicholas Mak, executive director for research
and consultancy at SLP International Property Consultants.
SLP suggests that, for example, it could perhaps be applied on an
upcoming mixed-use site at Holland Village under the Government Land
Sales programme.
In 2013, the Urban Redevelopment Authority introduced measures to curb
the proliferation of tiny shops. Its guidelines ruled that the average
retail unit size should not be less than 50 square metres and also
stipulated minimum corridor widths for retail component of new
commercial and mixed-use projects.
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