Retail rents in Singapore’s central region fell 1.1% in Q4 2022, but market experts remain optimistic about the sector’s recovery
SINGAPORE: Although official data indicates a bigger drop in retail rents in Singapore’s central region in the fourth quarter of 2022, market observers suggest that the retail sector is in a significantly better position compared to a year ago.
Knight Frank Singapore’s head of research, Leonard Tay, remarked that 2022 marked a pivotal year in the easing of pandemic restrictions, allowing retailers and F&B operators to gradually return to pre-pandemic operations. Tay pointed out that net take-up of retail space across the island surged by 710,417 sq ft in Q4 2022, contributing to a positive net take-up of 990,279 sq ft for the full year. This is a notable improvement from 2020, when net take-up was negative by 1.7 million sq ft.
Data from the Urban Redevelopment Authority (URA) reveals that retail rents in the central region dropped by 1.1% in Q4 2022, a larger decline than the 0.4% decrease in Q3 2022. Despite this, the retail market has shown resilience, with the island-wide vacancy rate of retail space falling to 7.1% by the end of Q4 2022, down from 7.8% in the previous quarter. This is attributed to the decrease in vacancy rates in both central and non-central regions.
JLL Singapore’s consulting director, Angelia Phua, attributed the drop in vacancy rates to increased shopper traffic and rising tourist arrivals, which encouraged retailers to expand their businesses. With the year-end festive season and the upcoming Chinese New Year, retailers have been eager to secure prime spaces. Phua expects demand for retail space to remain strong in 2023, supporting rent growth for prime floor spaces despite potential macroeconomic challenges.
While Phua remains optimistic, Edmund Tie’s Lam Chern Woon expressed caution, highlighting concerns such as high inflation, the possibility of new COVID variants, and potential changes to travel restrictions, which could dampen retail sentiment and consumer confidence.
URA’s price index for retail space in the central region contracted by 2.1% in Q4 2022, following a 3.2% decrease in Q3. For the entire year, retail space prices dropped by 7.8%, a sharper decline than the 4.2% fall in 2021. However, Phua believes that rising rents will support prices for prime retail spaces, particularly in high-quality assets, given the favourable supply-demand dynamics and optimism surrounding tourism and domestic consumption recovery.
