Two-tiered retail market in 2Q2024, with Central Region rents staying flat

URA's 2Q2024 data showed that retail space rents in the Central Region remained flat after a 0.4% q-o-q decline in the previous quarter. "The retail market continues to be two-tiered in 2Q2024, characterised by softer leasing demand in secondary locations and strong demand in prime spaces," says Tricia Song, CBRE head of research for Southeast Asia. Islandwide prime floor rents increased by 1.1% q-o-q, extending the rise of 1.0% q-o-q in the previous quarter. Retailers remained optimistic about tourism recovery and consumer spending upon the disbursement of Community Development Council (CDC) vouchers, notes CBRE. Read also: Is it a Good Deal?: $1.38 million for a freehold studio with a private lift in District 9 Advertisement Advertisement Tourism recovery has also benefited prime retail rents, says Wong Xian Yang, Cushman & Wakefield (C&W) head of research for Southeast Asia. With the Singapore-China mutual visa-free scheme, visitor arrivals from China regained their top spot in 1H2024. The 1.4 million Chinese visitors registered in 1H2024 is around 80% of the 1H2019 pre-Covid levels, adds Wong. Visitor arrivals from other traditionally top source markets, namely Indonesia and India, will also increase as they came in below pre-pandemic levels over the same period.

F&B continues to drive demand

Demand for prime retail space was primarily driven by F&B operators, with some concepts forming partnerships, notes CBRE, for instance, Na Oh Korean restaurant with Korean auto firm Hyundai Motor Group and coffee-and-fashion company Alchemist & Arcade. Beauty & health, and fashion brands also increased their presence during the quarter, including Korean cosmetic brand Jungsaemmool, homegrown beauty retail chain store Novela, Chinese brand shoe store Vivaia and Parisian boutique Clémence by Rue Madame. "While a myriad of new-to-market brands are making their foray into Singapore, there are also numerous closures and consolidations as retailers face manpower shortage, competition from e-commerce and higher operating costs," says CBRE's Song. URA's 2Q2024 data showed a positive net absorption in the private retail sector for the third consecutive quarter. Net demand for space stood at about 388,000 sq ft, extending the positive net absorption of about 54,000 sq ft.

Vacancy rate stabilises

Islandwide stock increased by about 420,000 sq ft, and vacancy rates remained unchanged q-o-q at 6.6% in 2Q2024. Resilient occupier demand and moderated supply drove retail vacancy rates lower, says Angelia Phua, JLL consulting director of research and consultancy. The vacancy rate in the overall Central Region remained stable at 7.7% in 2Q2024. In the Rest of Central Area, vacancy rate declined 0.7 percentage points (ppt) to 8.8% in 2Q2024. Read also: Grand Hyatt Singapore to reopen on July 10 Advertisement Advertisement All submarkets had positive net absorption in 2Q2024 except for the Orchard area, which saw no net absorption, says CBRE. The Outside Central Region (OCR) and Rest of Central Regions (RCR) outperformed in the quarter, posting positive net absorption of about 237,000 sq ft and 65,000 sq ft, respectively. CBRE's Song attributes the strong space take-up in OCR and RCR to the completion of Pasir Ris Mall and New Bahru in 2Q2024. The vacancy rate in the OCR rose to 4.6% in 2Q2024 from 4.4% in the previous quarter. Vacancy rates in the RCR submarket fell to 8.5% from 9% in 1Q2024.

Moderated supply pipeline in Orchard Road

Orchard Road vacancy rose to 6.7% q-o-q in 2Q2024 from 6.6% the previous quarter due to a marginal increase in new supply and no net absorption. JLL's Phua says the moderated supply pipeline and firm occupier demand could lower vacancy rates for the rest of 2024. JLL expects prime floor rents to grow by 1.5% to 2.5% y-o-y in 2024. According to C&W's Wong, only 9% or about 150,000 sq ft of new retail supply between 2H2024 and 2028 is expected to originate from the Orchard area. The retail component of the renovated Grand Hyatt Hotel Singapore and the redevelopment of The Cathay are set to be completed in 2024, while the redevelopment of Faber House into a hotel with the retail component is expected to be completed in 2026.