SINGAPORE (Oct 12): Retail REITs have a chance to shine next year, says DBS Group Research, given consistently strong take-up rates for upcoming retail spaces this year which are a reflection of healthy demand in the retail arena.

Ahead of its opening, Changi Airport Group announced Jewel has achieved committed occupancies for almost 90% of its retail space based on NLA of 575,900 sf.

“With commitment for Jewel now close to 90%, we believe that investor concerns over potential oversupply issues – the main drag on the retail sector’s lacklustre performance this year, in our opinion – should start to dissipate,” says lead analyst Carmen Tay in a Friday report.

Jewel will feature over 280 shops and eateries, which will envelop the mall’s Forest Valley and Rain Vortex, allowing shoppers to traverse seamlessly between nature and retail.

Six of 10 brands will be new to Changi Airport and F&B operators will represent over 30% of Jewel’s retail mix including new market concepts like Shake Shack, Pokemon Centre Singapore and A&W as well as homegrown brands such as VioletOon’s, Tiger Beer and Naiise.

Tay says near-term disruptions are likely to be seen to existing malls in the east (Tampines Mall, 11.6% of Capitaland Mall Trust top line) and Changi City Point (13.5% of Frasers Centrepoint Trust top line) and even to as far as VivoCity (55% of Mapletree Commercial Trust revenues) as shopper travel patterns and retail spent might be diverted to the newer malls due to “novelty effect” with the opening of Jewel in early 2019.

However, Tay does not expect these disruptions to be structural in nature and “travel patterns should return to normalcy in the medium term as the effect runs out”.

Furthermore, with several retail REITs starting to see positive reversions in the recent quarter, she believes the worst for the sector is almost over.

“Given limited new supply, and as vacancy risks continue to contract, we believe that 2019 could be the sector’s time to shine,” says Tay.

2019 could be retail REITs' time to shine, says DBS, just look at Jewel

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2019 could be retail REITs' time to shine, says DBS, just look at Jewel

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