Wednesday, March 27, 2013

URA sets minimum average size for retail units

The Business Times  |  MARCH 27, 2013
Aim is to prevent a rise in small units at malls that may not serve their intended purpose

[SINGAPORE] The government is moving to prevent a proliferation of small units at malls that may not serve their intended purpose and can cause disamenities, but said that this should not be read as an attempt to cool the strata retail market.

The Urban Redevelopment Authority (URA) yesterday introduced a minimum average size for retail units of 50 square metres (538 square feet) that takes effect today. This is comparable to a typical Housing and Development Board shop unit.

Also introduced were guidelines that retail developments should have minimum corridor widths of two to 2.4 metres for single loaded corridors, and 2.4 to three metres for double-loaded corridors. Single-loaded corridors serve retail shops on one side while double-loaded ones serve retail units on both. "They are not intended to be a cooling measure for strata retail market," a URA spokesman said last night.

The new guidelines, which apply to all new developments (commercial or mixed use) with retail floor area are meant to ensure a good shopping environment, the spokesman said.

This follows National Development Minister Khaw Boon Wan's comments on his blog that flagged "a couple of developers" who have submitted applications for malls that feature mainly shops as small as nine sq m (97 sq ft).

"At nine sq m, the shop will be even smaller than a car park lot," Mr Khaw said.

URA said it had received more proposals that include a large number of small retail units from nine sq m to 25 sq m, with narrow corridors less than 1.5 metres wide. This means a mall can potentially have more than 10 times as many shops as it did before redevelopment.

Mr Khaw said that small shops have a place in the retail landscape as they support entrepreneurs and are suitable for trades such as moneychangers and florists, but is concerned if they are the predominant shop type.

"If these shops are not suitable for most retailers, then the developers' motive is probably to target individual property investors rather than genuine retailers.

"Who will the individual property investors sell or tenant to after the developers have sold these units to them?" he questioned.

URA said that developments with many small shops and narrow corridors can cause a lack of car park space and traffic congestion, and may not meet the varied needs of shoppers or be able to handle pedestrian traffic during busy hours.

After consulting industry players, such as the Real Estate Developers' Association of Singapore and the Singapore Institute of Architects, who share the authorities' concern, URA introduced the latest measures.

Mr Khaw said: "They give developers and architects the flexibility to propose a suitable mix of larger and smaller shops for their developments."

Market watchers welcomed the latest measures.

Letty Lee, director of retail services at CBRE, said the latest guidelines will restrict developers of future retail projects from creating too many "micro shop units", which will in turn limit the number of potential investors or buyers.

Ong Kah Seng, director at R'ST Research, said the measures were "quite necessary and relevant" due to the strong demand seen for strata retail units over the past year.

He said smaller units usually cater to small and new retailers with limited financial capacity, which may not be sustainable. A large new supply means buyers may not see their investments pan out.

Ku Swee Yong, CEO of International Property Advisor, added that mall performance cannot be truly assessed before completion. He gave an example of how hard it would be to tell if the hot-selling Alexandra Central units will do well because they are surrounded not just by the popular Ikea store and Queensway Shopping Centre, but also the quieter Anchor Point.

To further protect investors, he suggested that loan-to-value ratios be tightened, since it is possible to offset smaller unit space with one big outlet.
Rentals are likely to come down with the new guidelines, especially for small malls or mixed use projects, where retail space is more limited, said Png Poh Soon, head of research and consultancy at Knight Frank Singapore.

This is because smaller units fetch higher rents per square foot in general.

"Naturally that translates to lesser returns," he said. A knock-on effect is that land bids for mixed-use developments could come down as well.

Elaine Chow, associate director of research at HSR Property Consultants, said that developers have to put more thought into their costing, which in turn affects development values.

Martin Koh | 86666 944 | R020968Z
Sherry Tang | 9844 4400 | R020241C

Senior Sales Director
DTZ Property Network Pte Ltd (L3007960A)

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