Market Overview

Singapore Economy

Year 2003 was highlighted by a turbulent first half for the Singapore economy, which had to weather, among other things, the global repercussions of the war in Iraq and the outbreak of SARs. The outlook turned brighter, however, as the year drew to a close, riding on improving prospects in key global and Asia Pacific markets.

The pick-up in the second half pushed full-year GDP performance into positive territory at 1.1 percent. Barring any unforseen shocks, economic recovery is widely expected to gather pace in 2004, with the Government currently predicting a robust 3.5 to 5.5 percent expansion.

Singapore Retail Property Market

The improving economic outlook since the second half of 2003 has not yet, however, visibly lifted sentiments in the property market as a whole, as concerns such as excessive supply and shift of real estate demand to competing economies in the region persist.

Against this backdrop, the retail property sector stood out as one of the rare bright spots in 2003, demonstrating strong resilience in both occupancy and rents. At the Orchard Road belt and established suburban locations, prime malls generally saw occupancies maintaining around a high 95 percent level and rentals holding steady throughout the year.

The strong showing by prime retail malls was partly due to limited new supply of space and the fact that short term uncertainties have not dampened retailers desire to maintain and even increase market presence. The recent spate of refurbishment and repositioning initiatives by various shopping centre owners to meet new market demand and expectations also bear testimony to the high levels of activity and interest in the market. For suburban malls, an additional boon was their strong focus on essential goods and services for the heartland population bases, which rendered them less vulnerable to short term volatilities such as that brought about by SARs.

Outlook for 2004

We are generally optimistic on the prospects of the retail industry and the retail property market in 2004. We believe the expected upswing in the economy will have a positive impact on consumer sentiments and retail sales, thereby sustaining retail space demand.

Moreover, the supply of retail space is expected to remain tight as the new supply due in the year is low, thus further limiting downside risks in relation to occupancy and rental.