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Retail rents fell further in 4Q2022, but occupancy improved
By Atiqah Mokhtar | January 27, 2023

Retail rents in the central region decreased by 1.1% q-o-q in 4Q2022, while islandwide vacancy rates declined by 0.7 percentage points (Picture: Albert Chua/The Edge Singapore)

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SINGAPORE (EDGEPROP) - Retail rents in the central region fell in 4Q2022, continuing a downward trajectory charted since 1Q2020. According to URA data released on Jan 27, retail rents in the central region decreased by 1.1% q-o-q last quarter, widening from the 0.4% q-o-q fall recorded in 3Q2022. “The URA retail rental index has now fallen for three years or 12 consecutive quarters, cumulating in a 22.4% decrease from 4Q2019,” observes Leonard Tay, head of research at Knight Frank Singapore.

The continued fall in rents can be attributed to ongoing sector headwinds such as manpower shortage, rising costs and more cautious consumer sentiment, says Lam Chern Woon, head of research and consulting at Edmund Tie. “Landlords have had little pricing power to raise rents, as the operating environment remains extremely challenging for retailers,” he explains.

Prices of retail properties also continued to fall, registering a decline of 2.1% q-o-q in 4Q2022. Retail property prices fell by 7.8% in 2022, which Lam points out is the steepest full-year decline since 2017.

But despite the continued dip in rents, Knight Frank’s Tay points out that the retail sector is “in a much better place” compared to a year ago. For the whole of 2022, retail rents in the Central Region declined by 2.4% y-o-y, easing from the 6.8% fall in 2021. “2022 represented a pivotal easing of pandemic restrictions such that retailers and F&B operators could begin to gear up operations with pre-pandemic normalcy in view,” he explains.

Tricia Song, head of research, Southeast Asia at CBRE, concurs, noting that retail indicators remained positive in 4Q2022 on the back of the return in tourist spending and the front-loading of big-ticket purchases ahead of the GST hike which took effect on Jan 1.

Correspondingly, the private retail market saw a surge in leasing activity in 4Q2022 as retailers sought to capitalise on the increase in sales during the festive period, notes Song. Islandwide net absorption totalled about 710,417 sq ft in 4Q2022, more than double the roughly 322,917 sq ft in the previous quarter.  Islandwide private retail vacancy rates fell from 7.8% in 3Q2022 to 7.1% in 4Q2022., representing an improvement in occupancy of 0.7 percentage points.



For the full year, private retail space net absorption came in at about 990,279 sq ft, marginally lower than the 1.08 million sq ft in 2021.

Going forward, Edmund Tie’s Lam expects tourism spending to support retail sales, providing an uplift, especially in the prime shopping belt. “However, we take caution that considerable headwinds going forward, including high inflation and uncertainties such as possible emergence of new Covid variants, as well as any retightening of travel borders and local measures will continue to weigh on retail sentiment and consumer confidence, likely capping consumer spending and rental growth,” he caveats.

Barring any deterioration in economic conditions, Lam projects prime first-storey rents in Orchard to see a growth of 7% to 9% this year, while prime mall spaces are forecasted to see rental growth of 3% to 6%.

Knight Frank’s Tay believes rental growth of prime retail space will accelerate in 2023, underpinned by continued recovery momentum following the removal of pandemic-related restrictions. “So long as there are no size limits to gatherings and quarantine requirements for cross border arrivals, prime rents of retail space are likely to grow between 3% and 5% for the whole of 2023, with the prime shopping belt Orchard Road leading the recovery,” he predicts.

Read also: Prime retail rents to see further recovery in 2023, with Orchard Road leading the way


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