What does the future look like for Singapore’s retail property market?

The worst is already behind us, but rents won’t start picking up until 2022.

The retail sector is one of the hardest hit by the pandemic and the subsequent lockdowns. According to Savills, the retail and F&B sector fell back when Singapore re-instituted Phase 2 on May 16 which ended on June 13. 

However, dine-ins were only permitted on June 21 and were restricted to two persons per table. Retail and entertainment establishments have since seen a gradual increase in footfall, but still lower than those recorded during Phase 3 of the pandemic control stages. 

Here’s more from Savills:

While the recovery looks promising, it is also clear to many that the pandemic is resulting in an uneven performance within the retail and F&B sector. If a majority of companies do not mandate their staff to return to the office each day of the week, we will continue to see the suburban malls benefiting at the expense of the CBD. When lockdown measures were implemented in April 2020, some chained restaurants saw many of their suburban outlets registering higher revenues than pre-COVID days. 

However, as we reverted to Phase 2 on July 22, their daily takings have so far been less than what they were a year ago. When dine-ins resumed on August 10, the average mobility in these places rose to 78.2%. Nevertheless, this is significantly below the 80s level that we witnessed during Phase 2 last year.

As patronage to bricks and mortar retail and F&B is very sensitive to the Phase number, performance will mirror the course of the pandemic. At a micro level, businesses located in suburban malls, though negatively impacted by the restrictions imposed to limit the spread of the disease, are performing significantly better than those in the CBD.

The rental relief package for tenants in private commercial buildings implemented for Phase 2 (Heightened Alert) together with the Jobs Support Schemes may soften the impact somewhat on the retail and F&B sectors. However, for businesses which have survived thus far, a few possibilities present themselves:

• Increase their online presence;
• Shutter outlets which they feel have the least probability of turning around in the foreseeable future;
• Turn to experimental concepts which they believe may succeed given the observations of customer behaviour gained during the past 18 months;
• Expand further but cautiously into suburban areas with minimum overheads with the flexibility to move on if things do not work out; or
• Cease operations and step back entirely from the market to return when uncertainties diminish.

In conclusion, although the worst for the retail and F&B industries appears to be behind us, uncertainties linger. This will likely translate to a slower rate of ascent for rents which we believe will begin in 2022. The industry had been trying to get back on its feet in Q1/2021 with replacement tenants starting to open up in many of the vacated units in the CBD, but with the move to more restrictive population density controls, entrepreneurs have become more cautious. Nevertheless, those who are adaptable will make it through this epochal change and healing and recovery will return to the industry hopefully next year.