Bleak prospects for retail sector

My friend is in the retail trade, online business. He said that the retail sector in Singapore faced two big problems:

a) There is a big over-supply of retail space. Too many malls were buit and sold at high prices. The landlord needs a high rental to pay the mortgage and get their expected return. But the retailers cannot afford these rentals as the customers are spread around too many malls. Business is poor.

b) More customers are now buying online. The recent entry of Amazon into Singapore will pose a big threat to stores selling branded goods. Amazon is able to see the goods at half the prices of the retailers. Even the non-branded products are affected by the online merchants.

c) There is some hope for the F&B sector as they are not affected by the online stores. But these operators are affected by the high cost of wages, due to government levy on foreign workers and the reluctance of locals to take up these jobs. These outlets are also struggling.

The positive side is that the rentals for retail sector will have to fall by a lot. At that time, the F&B sector may be able to survive. But that will take a long time to sort out.

The REITS (real estate investment trusts) will soon feel the pain from lower retail rentals and lower occupancy.

This is a bleak prospect for the retail sector.

Tan Kin Lian






Tan Kin Lian