Singapore prime retail rents down 5.8% for full-year 2021

Monthly prime retail rents averaged S$25.40 psf in Q4 alone.

One in four companies in the services sector expect business conditions to improve from October 2021 to March 2022, according to Singstat’s Business Expectations Survey. 

According to Knight Frank, the establishment of more travel lanes, coupled with IATA’s projections that air travel will gradually increase throughout 2022 and return to pre-pandemic levels by 2023 also played a part in boosting much needed confidence, as Singapore’s transition to endemic living remains on track.

Here’s more from Knight Frank:

Putting behind a difficult year characterised by frequent reimposition of restrictions and disruptions, the improving sentiment partially translated into an uptake of retail space as more brands continued to set up shop. Flash Coffee, an active adopter of technology, progressively capitalised on the use of a digital platform to quicken a consumer’s purchasing journey through a more convenient channel.

The coffee chain enables customers to order and pay through its own mobile application, providing an additional option to self-collect or get their orders delivered. In tandem with the continually evolving retail landscape, Flash Coffee hopped on to this digitalisation wave to expand to various locations in Singapore. The brand now has 29 stores under its belt, including a newly-opened flagship outlet at Orchard Gateway.

Prime retail rents on the road to recovery at last

In Q4 2021, prime retail rents across the island averaged S$25.40 psf per month, falling by 5.8% for the whole of the year. Among the regions in Singapore, the rentals of prime spaces in suburban malls were most resilient throughout 2021, even though a decrease of 3.5% y-o-y was recorded. Prevailing work-from-home protocols, particularly when workers reverted to stringent workplace measures, supported the retail sector in heartland residential areas.

However, prime retail space in the central region struggled throughout much of 2021 with the constant shift back to regressive measures which often resulted in suppressed footfall. Nevertheless, as workers return to the workplace at an increased capacity of 50% starting from January 2022, retailers have cause to be hopeful as consumers resume downtown shopping activities. 

Footfall within the CBD area as well as the prime Orchard Road shopping belt increased towards the tail-end of 2021, and this will provide more retailers with the confidence to grow and expand in 2022. Especially so for retail spaces that have good visibility and well-located shopfronts in the city centre, given that rentals are currently soft with opportunities to ride on the long-awaited wave of recovery in the year ahead.

Market outlook 

Despite COVID-19, the local retail scene continues to expand in a spirit of enterprise. Borne out of the pandemic, local brands benefited from the lack of new-to-market foreign brands and infiltrated the domestic retail market, with affordable retail spaces serving as fertile ground to thrive. The quality of locally-sourced products, stability of a domestic supply chain, as well as heightened support for local brands will continue to see promising growth in demand and consumption of goods produced and sold within our borders. 

As more employees return to the workplace from January 2022 onwards, barring any regressive measures to contain recurrent waves of infections arising from COVIDvariants, the year ahead bodes well for retailers. Singapore’s continued journey towards living with COVID-19 is expected to support recovery in the retail market. 

With prime retail rents in suburban malls already showing signs of bottoming out, retail locations in Orchard and the CBD could follow suit as cross-border travel progressively increases throughout 2022. There is every chance that retail rents island-wide will turn positive in the process of rebound, growing between 2% and 4% for the whole of the year.