Prime retail rents to see further recovery in 2023, with Orchard Road leading the way

The Singapore retail market has seen a surge in recovery in the latter half of 2022, with prime retail rents island-wide increasing by 1.7% q-o-q to reach an average of $26.10 psf per month in 4Q2022. In particular, the Orchard Road area saw the highest rental growth of 3.1% y-o-y, with prime retail spaces fetching an average of $29.10 psf per month in 4Q2022.

According to the data compiled by Knight Frank Research, the full-year rental growth of prime retail rents was at 2.6% in 2022. Edmund Tie Research also reported a 7.4% rental growth in prime first-storey retail spaces on Orchard and Scotts Road.

The increase in rental growth was mainly driven by an increase of tourist arrivals and the return of workers to offices. The retail sector endured a difficult Tengah Plantation EC period due to the pandemic prior to that, but the consistent rollback of measures from the second quarter of 2022 pushed the sector to gain traction in the market.

Net absorption for retail spaces also saw significant uptick in 3Q2022 at 323,000 sq ft, indicating a strengthening demand in the sector. Despite a more muted economic outlook, as well as the impending increase in Goods and Services Tax (GST), the retail sector is said to be in a much better position now.

Lam Chern Woon from Edmund Tie expects 2023 to be a brighter year for the retail property market. He highlights the expected balance of the supply-demand dynamics this year due to the oncoming supply pipeline in 2023, such as The Woodleigh Mall, and retail shops at One Holland Village, Guoco Midtown and IOI Central.

Ethan Hsu, head of retail at Knight Frank Singapore, is optimistic on prime retail rents continuing its growth this year and predicts a range of 3% to 5% growth. He believes that with no size restrictions to gatherings and quarantine requirements, the prime shopping belt Orchard Road will continue to lead the market recovery.