The growth in the Singapore retail market picked up steam during the latter part of the year because of social distancing rules being eased and the reopening of borders. “The retail sector fought hard and is now through an extremely difficult period of unprecedented pressure, but is now getting started to gain momentum from the elimination of the measures beginning in 2Q2022 and beyond,” says Ethan Hsu, Knight Frank Singapore’s retail head.
According to the data from Knight Frank Research, prime retail rents across the island increased 1.7% q-o-q in 4Q2022 to average $26.10 per month. The full-year peak retail rents up to 2.6% for 2022.
In its report on the retail sector for 4Q2022, Knight Frank notes that prime retail locations located in areas like the Orchard Road area led the way with regards to rental growth with an average increase by 3.1% y-o-y in 4Q2022 to $29.10 per month. This was being followed by prime retail spaces within the Marina Centre, City Hall and Bugis sub-markets, which recorded an increase by 2.6% y-o-y to $23.90 per month. The increase in rent was helped by an increasing number of tourists from abroad as well as the return of employees to work.
A separate report from Edmund Tie Research also highlights evidence that further indicates the growing the demand for retail space in the Orchard region. Based on the track of retail assets by the company, the prime retail spaces on the first floor of Orchard along with Scotts Road saw the strongest rent increase that was 7.4% for the whole of 2022, ranging from $39.20 per sq ft per month. In the suburban and fringe regions, rents increased to 6.7% in 2022 to $33.10 per month. however, in other cities they increased to 3.7% to $19.20 psf per month. This is based on Edmund Tie’s statistics.
Edmund Tie’s research reveals it was 3Q2022 when the island’s retail space absorption was recorded at 323,000 sq ft. This is an increase of fourfold from 86,000 sq ft recorded in the previous quarter, which indicates an increase in demand.
Lam Chern Woon, head of research and consulting at Edmund Tie, expects a brighter future in retailers in the property market, which is bolstered by the ongoing growth in the sector of tourism. “With the majority of the pipeline for supply set to start coming on stream in 2023, which includes The Woodleigh Mall, and retail stores at One Holland Village, Guoco Midtown and IOI Central, the supply-demand patterns are predicted to be balanced in the coming year.” He adds.
The company is forecasting that prime retail rents on the first floor for Orchard as well as Scotts Road to sustain its growth approximately 7% to 9% in 2023. In contrast, rents in other sub-markets of retail are expected to increase by between% to 6%.
Knight Frank’s Hsu also projects the prime rent for retail to keep increasing this year, pointing out that the retail industry is “in an excellent position right now” considering the rise of taxes like the Goods and Services Tax (GST) and a more muted economic outlook. “So long as there’s no limits on the size of gatherings and the requirements for quarantine for cross-border arrivals, prime rents for retail spaces are expected to rise between 3% to 5% over the course of 2023. The affluent shopping area Orchard Road leading the recovery,” he predicts.