RETAIL rents weakened and vacancy rates jumped in the first quarter as a tight labour market and lower tourist numbers took a significant toll on the sector.

But the retail picture is mixed. Tougher times may lie ahead for shops that depend on tourism while rents in the suburbs could be more resilient, experts say.

Islandwide, vacancy rates rose one percentage point quarter on quarter to 6.8 per cent in the first quarter of this year.

This is the highest level since retail data was made available by the Urban Redevelopment Authority in the first quarter of 2011.

It represents 4.34 million sq ft of vacant gross floor space, up from about 3.7 million sq ft in the fourth quarter last year.

Newer malls including Paya Lebar Square and Alexandra Central, completed in the fourth quarter of last year, may have contributed to this, said Mr Ku Swee Yong, Century 21 chief executive.

Vacancies in the Orchard area could have been caused by 268 Orchard Road, whose redevelopment was completed in the fourth quarter, and Shaw Centre, which completed its additions and alterations work in the third quarter.

Overall, net demand for retail space shrank by about 269,100 sq ft in the first quarter as net new supply came in at 366,000 sq ft.

One factor is tourism.

Tourist arrivals fell from 15.6 million in 2013 to 15.1 million last year, the first drop since 2009. There were 2.4 million visitors in the first two months of this year, a 5 per cent year-on-year decline.

Retail sales, largely depressed over the last year, fell 3.3 per cent in February over January.

"Consolidation of space has been more evident since the start of this year... It is likely to continue especially for retailers which had expanded more aggressively during the peak of the market," said Ms Christine Li, research director of Cushman & Wakefield.

The manpower crunch has a varying effect on how much space tenants want, said Dr Chew Tuan Chiong, chief executive of Frasers Centrepoint Asset Management, manager of Frasers Centrepoint Trust.

A retailer may find it is not deploying manpower efficiently if it has too many branches; and may choose to add space in a selected outlet instead.

Rents reflected the poorer retail outlook, sliding 0.3 per cent quarter on quarter, after rising 0.5 per cent in the fourth quarter.

Median rents fell across all three areas - the Orchard area; the rest of city area, including Shenton Way and Selegie Road; and the suburbs. The steepest fall was in Orchard, where median rents slid seven cents to $10.89 per sq ft (psf) a month. They were down three cents to $6.72 in the rest of the city area, and down one cent to $6.04 in the suburbs.

In Orchard Road, where retailers depend on tourists, average monthly rents for prime ground-floor retail space dipped 0.9 per cent quarter on quarter to $35.83 psf a month after easing 0.2 per cent in the fourth quarter, said Ms Chia Siew Chuin, Colliers International director for research and advisory.

Major retailers have been withdrawing from Orchard and the Downtown Core, and possibly Rochor and Outram areas as well, said Dr Chua Yang Liang, JLL research head for Singapore and South- east Asia. Prices for retail space stayed flat in the first quarter, after rising 1.5 per cent previously.

Research by Colliers International found that the average imputed capital value for prime Orchard Road strata-titled retail space dipped 2 per cent quarter on quarter to $6,803 psf in the first quarter.

It had been unchanged for the past seven quarters.

But capital values for regional centres fared better, being unchanged in the latest period.

A further 1.2 million sq ft of gross retail space is set to be completed this year, largely in the suburbs, noted Dr Chua of JLL.