Singapore’s prime retail rentals increased 1.2% year over year in the first quarter of 2023

, ,

Read more: The 1Q2023 investment volume was $4 billion, the smallest quarterly total since the 4Q2020

The 1Q2023 investment volume was $4 billion, the smallest quarterly total since the 4Q2020

Singapore retail rental rates continued increase in the first quarter of 2023 due to the current growth in the tourism industry. According to a report from Knight Frank, gross rent of prime areas island-wide averaged $26.40 per month. (psf pm) in the 1Q2023, an increase of 1.2% q-o-q and 5% in a year-on-year basis.

The increase is a result of a rebound in the tourism industry following the pandemic. A number of borders across Asia are now open over the last year as well, with Singapore accepting visitors from countries previously closed to visitors. According to the statistics of Singapore Tourism Board (STB), Singapore Tourism Board (STB), Singapore welcomed more than 2.9 million visitors in the 1Q2023. Even though these numbers are just two-thirds of the number prior to the outbreak (4.7 millions of visitors) The average duration of visitors in Singapore went up from 3.34 days for 2019 up to 3.97 days by the early portion of 2023.

The constant rise in the number of tourists continues to drive up retail real estate rentals particularly in the most sought-after Orchard Road shopping strip, according to Ethan Hsu, Knight Frank Singapore’s retail head. The Orchard region saw an increase on retail rentals in the range of 1.4% q-o-q and 5.2% year-over-year in the 1Q2023.

In the same way, prime retail rental for areas such as the Marina Centre, City Hall and Bugis region grew 1.3% q-o-q and 5.2% year-over-year to $24.20 per square foot at the time of publication and retail rentals at the City Fringe grew 1.4% in the q-o-q period in addition to 4.4% y-o-y to reach $22.60 per hour. Rents in malls that are suburban were stable, increasing 0.6% q-o-q to $26.20 per square foot, or 3.6% higher y-o-y.

The increase in rental rates is in spite of the 18.7% m-o-m fall in retail sales (excluding motor vehicles) in February, which amounted to $3.1 billion, which marks another month in a row of declining sales. This could mean the end of “revenge spending” by customers during festive seasons like Christmas or Chinese New Year celebrations according to Knight Frank’s Hsu observes.

Additionally, consumers grew more cautious because of the effects of inflation on non-discretionary expenditure. This is why the index of sales at retail decreased 12% month-over-month in January as well as 19.0% m-o-m in February. However, the volume of retail sales increased above the levels observed in the period of the pandemic. It was slightly higher than the pre-pandemic sales in February.

Knight Frank’s report reveals that even as Singapore’s retail industry grows, shoppers are still drawn to experiential shopping and lifestyle experiences. Singapore’s reputation as a safe location that is a magnet for private wealth has brought about global luxury brands opening new stores in the city-state from 2H2022, which includes Giuseppe Zanotti, Grand Seiko and Atelier Cologne. There has also been several new F&B newcomers such as Unatoto, Takagi Coffee, Hanazen, Luckin Coffee and Tim Hortons. In addition, Hong Kong’s cosmetics retailer Sasa has announced plans to relocate to Singapore despite having shut down its 22 stores in the city-state just three years ago.

The retail industry in Singapore is predicted to keep expanding and recovering as travel to and visitor numbers are near the pre-pandemic level. According to the STB’s estimates 12-14 million tourists are expected to arrive in 2023.

Despite the challenges of inflation and economic uncertainty as well as an upward adjustment to the tax on goods and services The sector’s growth should continue to boost retail rents. “As the recovery is firmly rooted and accompanied by a general confidence in the post pandemic retail environment and the prime retail rents are predicted to show modest growth that range between 3% to five% by 2023.” Hsu predicts.