SLOWING retail sales and fewer overseas visitors hit shop rents in the second quarter, said DTZ Debenham Tie Leung (South-East Asia) yesterday.

It noted that the amount of retail space vacated in the first three months of the year exceeded the amount leased out by 270,000 sq ft, a trend that had a flow-on effect on rents.

Orchard Road and Scotts Road were more hard hit, with an extra 80,000 sq ft of vacant space left after accounting for new tenants arriving. It was less severe in suburban areas, where an extra 20,000 sq ft was un-tenanted.

According to Singapore Department of Statistics data, retail sales excluding motor vehicles fell 0.7 per cent in April compared with the same month last year. Visitor arrivals between January and February dropped by 5.4 per cent to 4.85 million.

Occupancy rates in Orchard Road and Scotts Road dipped by 1.6 percentage points to 92.7 per cent in the first quarter, from the final three months of last year. This may have contributed to the average rent dipping by 1.5 per cent quarter-on-quarter to about $29.70 per sq ft (psf) in the second quarter.

A lack of new retail completions and little new space in the pipeline in the Orchard and Scotts Road area partly offset the decline in average rents, DTZ said. Only about 10,000 sq ft of retail space hit the market in the first quarter with Claymore Link's completion.

Occupancy rates in other city areas fell by 2.8 percentage points to 90.4 per cent in the first quarter, from the final three months of last year. The introduction of about 111,500 sq ft of retail space in the other city areas in the first quarter also helped depress rents.

Urban Redevelopment Authority data showed retail rents islandwide fell by 0.3 per cent in the first three months of the year, after a 0.5 per cent rise in the final quarter of last year. Average rents in other city areas in the second quarter fell by 1.8 per cent from the first quarter to $17.65 psf.

And with about 876,000 sq ft of retail space in the pipeline for the rest of the year, rents could fall further.

Landlords are offering new-to- market brands and new retail concepts to inject vitality, said DTZ director of retail Anna Lee.