Singapore prime retail rents to grow by 2-4% in 2022 | Realestate Asia

Singapore prime retail rents to grow by 2-4% in 2022

The Suburban and Orchard retail markets are slated to drive growth.

As borders reopen and consumer sentiment recovers, prime retail rents in Singapore have started to rebound this year. 

According to Cushman & Wakefield, total retail sales in Singapore were up by 9.3% as of May 2022 YTD. Consumer spending still mainly takes place in brick-and-mortar stores, with online retail sales contributing 14.9% of total retail sales in May 2022 YTD, and this will continue to support demand for retail spaces. 

Here’s more from Cushman & Wakefield:

Although tourism recovery would support the retail market, it is expected to be dragged on by lower Chinese visitor arrivals due to China’s zero-Covid policy. Pre-Covid, Chinese tourists contributed about 19% visitor arrivals in 2019. 

Against this backdrop, prime retail rents are expected to climb 2%-4% y-o-y in 2022, led by the Suburban and Orchard retail markets. Thus far, prime retail rents in Orchard and Suburban have both increased by 2.2% each in H1 2022 YTD. Other City Areas rents are growing as well, albeit gradually, as more people return to the office. However, CBD footfalls remain lower compared to pre-Covid levels due to hybrid work and limited new office supply. 

Nonetheless, limited new retail supply would help support rents. New islandwide retail supply will only come up to 0.3 million sf per annum from 2022 to 2026, less than half the 0.9 million sf per annum from 2017 to 2021. 

Retail Operating Conditions Remain Challenging 

Despite recovering footfalls, retailers still face challenging operating conditions and higher operating costs due to manpower shortages, persistent inflationary pressures and food supply disruptions. This will be felt acutely for the F&B sector, a key demand driver for the retail market. 

Some retailers may face slower sales, as consumers become more price-sensitive and face lower disposable income amidst higher costs and mortgage rates. The reopening of borders would divert some consumer spending overseas, offsetting some of the gains due to higher inbound tourism. Discretionary retail trades such as fashion could see a larger impact.

 

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