Retail rents stop a five-quarter fall with 0.3% q-o-q gain in 2Q2023
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A number of new retail stores opened during the quarter increased the total absorption of retail space, which increased to 290,520 square feet in 2Q2023, reversed an increase of 75,320 sq ft in the first quarter of 2023.
“Last quarter was a busy time for the opening of new brands that are not yet available on the market like Sun as well as Sand Sports in Raffles City and international luxury brands such as Aluxe, Grand Seiko and Atelier Cologne. Markets also welcomed new food and drink (F&B) entry points like Mister Donut, Luckin Coffee, Jamba Juice and Chaffic Bubble Tea as well as there were several returns to the market by F&B and other lifestyle brands like Ben’s Cookies and Marimekko; all of which prove the confidence of retailers with Singapore,” says Lam Chern Woon director of the research department and consultancy for Edmund Tie.
Opening of The Woodleigh Mall in 2Q2023 was a further proof of the growing demand for retail spaces, like the rising pre-commitment rates for upcoming retail developments, like One Holland Village and Pasir Ris Mall, says Angelia Phua, director of consulting of research and consulting in JLL Singapore.
“In market capitalization, growth in rental in the 2Q2023 period likely pushed prices up, because investors remained in favor of good retail assets, including suburban malls due to their favorable outlook for rent and the high scarcity value,” she says.
This meant that the retail market was distributed across all geographic segments. In the Orchard Road planning area, Orchard Road planning area recorded the highest increase in sales, regaining the sharp shrinkage of 258,240 sq ft in the 1Q2023 quarter to a positive 32,280 sq ft of space in the last quarter.
“As more workers return to work Retail spaces located in the Rest of Central Area have also seen an increase in the demand for them,” adds Lam.
Therefore, the occupancy rates for The Orchard Road area and Central Area both experienced an rise by 0.7% to 86.8% and 90.5%, respectively. In the end both retail prices as well as rental rates for Central Area increased. Central Area rose by 0.3% per month in the 2Q2023, which was a turnaround after five quarters of consecutive declining.
For the Central Area, Orchard Road rate of vacancy has increased by 13.2% after hitting a lowest in the region of 13.9% in 1Q2023. “Orchard the prime retail market is the most sought-after destination for international brands getting ready to expand in the wake of a boom of tourism that is inbound,” says Wong Xian Yang who is the head of the research department for Singapore in the region of SEA for Cushman & Wakefield.
He believes Central Region Retail rents to be able to recover, supported by the constraints of new prime retail inventory and an anticipated return of Chinese tourists. He also said that the monthly arrivals of visitors to Singapore have surpassed one million in March and are set to exceed Singapore Tourism Board’s prediction of visitor numbers of 12 million to 14 million in the entire year 2023.
The retail rents of areas like the Orchard Road area will continue to drive growth in the near term as a growing number of new and high-end brands open shops on the belt of shopping according to Wong However, he says: “The overall retail market is still volatile due to economic uncertainty and the long-term high cost of living will remain a burden on retail sales and consumer confidence”.
“Underpinned by a fairly limited supply pipeline, we anticipate to see Central Region retail rents to reach their peak by the end of 2023 with a more complete recovery in tourism and a more clear economic direction,” concurs Lam.
“Considering Singapore’s status as a safe-haven and the favorable demand-supply fundamentals that are present in Singapore’s retail property market, as well as the limited supply of assets that can be traded rising rents will support the cost of premium floor space in high-quality retail properties, despite the higher expectations for yields in a high interest rate environment” Phua says. Phua.