There has been keen demand for small retail units in recent years, especially those in mixed development projects as investors look to park their funds in real estate sectors unaffected by cooling measures.
However, analysts warn that getting tenants to rent these shops may get increasingly challenging.
27-year-old Zoey Che opened a nail parlour at ICON@Changi, near the Eunos MRT station in May. In the past three weeks, she has served just seven customers, despite having spent about $1,000 to market her services. She is renting this 140-square-foot shop for $1,600 a month for a year.
She said: "Most likely for the first half of the year it is actually losses... This is my first month here, I'll see how it is in six months. I am not upset. It is predictable considering the emptiness of the shops around here."
The majority of the shops around the basement unit she leased are empty and Ms Che said shopper traffic is almost non-existent for now.
Channel NewsAsia understands that ICON@Changi was ready for occupation towards the end of December 2012.
Analysts said filling shop spaces is never easy.
Ku Swee Yong, CEO of International Property Advisor, said: "Depending on the location of your unit and whether your unit comes fitted with taps and sinks and drainage, then it is suitable for certain type of retail, so you might be hard-pressed to get any tenant in at a reasonable price.
"You will be under competition from the rest of the strata retail shop owners, so you might have to hold the shop empty for six months or worse, in some cases we are seeing more than 12 months of empty space."
According to property consultancy Knight Frank, about four million square feet of net lettable area of retail space will come on stream by the end of 2016. That is equivalent to about four VivoCity malls -- and under a quarter of that space is strata-titled commercial premises.
Analysts said strata-shop owners may also have to fight it out with wholly-owned malls for tenants.
Alice Tan, senior manager of consultancy and research at Knight Frank, said: "Such landlords have the resources to do more concerted marketing efforts and they have stronger strategies to organise and plan and strategise their tenant mix for the mall. And in so doing they are able to put forth a compelling retail experience and therefore able to attract retailers."
Meanwhile, property agency HSR expects about 2.8 million sqft of retail space to be completed in 2013 and 2014, with 70% of the spaces located in the suburbs. HSR said the average absorption rate for retail space between 2008 and 2012 is about 546,000sqft per annum.
As the Singapore economy undergoes restructuring, analysts said issues like rising business cost and the manpower crunch could also crimp growth in the retail sector, and that is something investors must consider as well.
To curb the proliferation of shoebox retail units, the government introduced new rules on the minimum average size of retail units and minimum corridor widths on March 27, 2013.
Source: Channel News Asia
Coincidenally, one of our readers wrote to us recently asking for our opinion on a certain newly-launched mixed-development located in the suburbs.
Other than the fact that we find the 2-bedder unit (about 660sqft) a tad too small, we feel that mixed development (where there are both commercial and residential units) is somewhat of a "hit and miss". This is especially when the commercial units within the development are strata-titled - this means that the units are bought by private owners (mainly investors) whom will rent these out to whoever that wish to setup shop. As such, there is usually little control on the tenant-mix or the quality of the tenant. So you may end up with a situation whereby the shops are either empty or leased by establishments that do not provide you with the amenities that you need/desire.
