Singapore retail industry’s ‘recalibration’ bolstered by the pandemic

New brands opened concept and flagship stores as several brands exited the industry.

Based on Colliers’ research, ground-floor rent on Orchard Road declined 2.7% HOH in H1 2021 to SGD36.24 (USD26.96) per sq foot, while that of Regional Centres declined 2.0% HOH to SGD31.05 (USD23.10) per square foot, impacted by the Phase 2 (Heightened Alert) tighter restrictions of prohibited dine-in, and lower mall occupancy limits and permissible group size. This was worsened by infection clusters that were linked to several malls. 

Here’s more from Colliers:

The pandemic has accelerated the ongoing recalibration of the retail industry. With the exit of several brands (e.g. Dimbulah Coffee, Naiise, Abercrombie & Fitch and TEMT in H1 2021), opportunities were created for new brands to enter the market via concept and flagship stores, as part of their omni-channel distribution network, while landlords are pushed to adjust their tenant optimization, asset repositioning and placemaking strategies in response to changes in the retail industry. 

In H1 2021, Honey’s Bar opened its first store in Jurong Point and a BTS pop-up store was launched at Funan after its earlier success in Plaza Singapura. Flash Coffee plans to expand its operations in Asia by adding 300 new outlets by end–2021, and jewellery group Malabar is targeting to open 16 overseas outlets including Singapore by Q1 2022. Further, The Shoppes at Marina Bay Sands, which has welcomed about 20 new stores since June 2020, saw its occupancy recovering to 99% in Q1 2021. 

Meanwhile, the government announced more Covid-19 support packages (a SGD1.2 billion support package in May, and an additional SGD1.1 billon in July), which included more wage subsidies and rental relief. There were also food delivery and e-commerce subsidy schemes in place to help businesses diversify their revenue channels and defray the costs of going online. Landlords also helped by launching online retail and food delivery platforms to provide tenants with alternative sales channels, extending their customer reach and enhancing their online presence. At the same time, they continued to provide flexibility in rental payments and operational help for tenants facing severe cash flow issues. 

Total retail sales (ex-motor vehicles) rose 19.0% YOY in June 2021 on a low base, although lower than May’s 79.9% YOY jump due to the Circuit Breaker shutdown from 7 April to 1 June 2020. The strongest recovery was seen in segments that suffered the most during Circuit Breaker last year: Watches & Jewellery, Department stores and Wearing Apparel & Footwear. We continue to expect a K-shaped recovery for the retail sector with an uneven recovery among different trades. Online sales as a proportion of total retail sales rose to 15.4% and is likely to see further gains going forward, amid a structural shift of consumer habits. 

Overall, we see room for stabilisation in H2 2021 as higher vaccination rates could allow for potential easing measures towards the end of the year. We forecast average retail rents to decline by 1.8% in 2021 with reprieve from the limited 2021- 2025 islandwide supply (0.8% of total stock per annum versus the 10-year historical average of 1.1%), most of which are concentrated in suburban and fringe areas where there are well-defined population catchments. We recommend retailers and landlords to press forward with digitalisation, align online and offline pricing strategies, and innovate in refreshing product offerings and marketing efforts.