Retail rents end five consecutive quarters of declines with 0.3% q-o-q growth in 2Q2023
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Investors have continued to favour quality retail assets due to the scarcity of tradeable assets, as well as the positive rent outlook, driving prices higher in the capital markets last quarter. Take-up of retail space was broad-based across all geographic segments with the notable improvement in demand in the Orchard Road planning area, rebounding from a contraction of 258,240 sq ft in 1Q2023 to a positive 32,280 sq ft take up.
The Woodleigh Mall opening was a testament to the healthy demand for retail space, as are the growing pre-commitment rates of upcoming retail developments such as One Holland Village and Pasir Ris Mall. Last quarter saw several new retail openings, including new-to-market brands such as Sun and Sand Sports in Raffles City, and international luxury brands including Aluxe, Grand Seiko and Atelier Cologne.
The market also welcomed new F&B entrants such as Mister Donut, Luckin Coffee, Jamba Juice and Chaffic Bubble Tea. In addition, there were also several market returns by F&B and lifestyle retailers, such as Ben’s Cookies and Marimekko.
Monthly visitor arrivals in Singapore have crossed the 1 million mark since March and are on track to surpass Singapore Tourism Board’s forecast of visitor arrivals of 12 million–14 million for the whole of 2023. This is expected to drive up Central Region retail rents and lead to the recovery in overall retail rents towards end-2023.
Underpinned by a limited new prime retail supply and the anticipated comeback of Chinese tourists, Central Region retail prices and rents were up 0.3% q-o-q in 2Q2023, a reversal after five consecutive quarters of declines. Meanwhile, occupancy rates in the Orchard Road area and Central Area both saw an increase of 0.7% to 86.8% and 90.5%, respectively.
Consequently, retail rents in the Orchard Road area will continue to lead growth in the short-term as more new-to-market and luxury brands set up shop along the shopping belt. However, the overall retail market remains volatile given economic uncertainties and prolonged high costs would continue to weigh on domestic consumption and retailers’ confidence.
Given Singapore’s safe-haven status, the favourable supply-demand fundamentals of the retail property market and the scarcity of tradeable assets, rising rents should underpin prices of prime floor space in quality retail assets, notwithstanding higher yield expectations in an elevated interest rate environment.
Check out the latest listings near One Holland Village to take advantage of the current market climate.