Weakened occupier demand for retail space in Q1 2026

• Retail sales performance remain subdued due to cautious consumer spending, amid the looming geoeconomic cloud weighing on regional sentiment and lower consumer confidence. The tourism market softens from higher travel costs, economic and geopolitical risks.
• In Q1 2026, occupier demand in the broader retail market weakened q-o-q. The challenging operating environment and lowered consumer confidence in the economy continue to see closures especially in the Prime and Secondary submarkets.

Islandwide vacancy rate continues to rises in Q1 2026

• The softer occupier demand drove the islandwide vacancy marginally higher q-o-q in Q1 2026, despite a lack of new supply. Overall vacancy remains manageable as landlords prioritised preseving occupancy amid economic uncertainty.
• Vacancy rates in the Prime and Secondary submarket rose q-o-q on closures of underperforming retail chain, citing higher operational costs and soft economic conditions. However, global retailers continue to favor prime malls for their entry.

Rent and capital value growth continue in Q1 2026, although rental performance diverge by asset quality

• Prime and suburban retail rents rose over the quarter, although divergence is seen depending on asset quality. High quality malls in strategic locations with strong tenant mix saw rental resilience, while underperforming ones faced pressure.
• Capital values grew q-o-q in the Prime and Suburban submarkets in Q1 2026, mirroring rent growth while yields remained stable. Suburban submarket recorded higher growth as yield compressed on the back of stronger deal flow in Q1 2026.

Outlook: The rent outlook will support capital values as yields are expected to hold stable

• Persistently high operational costs and reduced retail spending, due to the softer economic and hiring outlook, are expected to threaten business viability, leading to more retail closures and a rise in vacancy rates, despite moderated supply.
• The weakened occupier outlook is expected to keep rents flat or cap rent growth, depending on the submarket. The rent outlook will support capital values with yields expected to hold stable supporting a positive yield spread over funding costs.