SINGAPORE (EDGEPROP) - Retail rents in the central region fell by 0.5% q-o-q in the second quarter, declining slightly from the 0.4% q-o-q in the preceding quarter, according to URA statistics released today. This brings the total rental decline to 0.9% for the first half of the year.

Read also: Retail rents improve by 0.4% q-o-q in 2Q2022: Knight Frank

“The easing of safe management measures (SMMs) in the second quarter brought much needed relief to retail establishments,” says Leonard Tay, head of research at Knight Frank. The pickup in inbound tourism which reached 1.3 million visitors from April to June also contributed to the increase in footfall in central areas, he adds.

Total retail sales (excluding motor vehicles) in May grew by 22.1% y-o-y, extending from the 13.5% growth in April, according to data released by Ministry of Trade and Industry statistics.

Median rents in the suburban and Orchard submarket declined by 1% and 0.1% q-o-q in the second quarter respectively, while rents in the Central Area (excluding Orchard) remained steady.

Based on Colliers’ database, prime retail rents in suburban areas and Orchard grew by 0.7% and 0.6% q-o-q respectively, exhibiting higher leasing demand, says Catherine He, head of research at Colliers.

Islandwide prime retail rents have yet to make a full recovery. However, the private retail market netted a positive absorption islandwide in the second quarter by 32,300 sq ft, led by improvements in the fringe and rest of central area submarkets. Overall vacancy improved marginally to 9.4% in the second quarter, from 9.5% in the preceding quarter

“F&B operators continued to drive demand while supermarkets and gyms continued to expand,” says Tricia Song, head of research at CBRE.

The second quarter saw the opening of Lululemon at I12 Katong, the brand’s first store in the East and Daiso’s concept store at Jurong Point spanning 15,000 sq ft of retail space. Paris Baguette also unveiled its flagship store at Raffles City.

“Several pop-up stores have opened in the second quarter which feature special thematic offerings, multi-sensorial immersive experiences and big brand collaborations,” notes He. These included the Clarins roving truck at Paya Lebar Quarter, Hillion Mall and Canberra Plaza, and the Gucci and Adidas and Louis Vuitton and Nike collaborations along Orchard Road.

Although the downtown core saw muted demand and recorded a zero net absorption in the second quarter, this still an uptick from the previous quarter of negative net absorption. Despite employees returning to work, retailers maintain a wait-and-see approach, observes Song.

Likewise, suburban demand experienced negative net absorption in the second quarter, with vacancy rates increasing by 0.9% to 6.3%. Intense competition among retailers also resulted in closures and consolidations. Kinokuniya closed its 7,800 sq ft store in Jem while Vhive closed its last remaining outlet in IMM. Song expects overall demand in the suburban market to remain resilient.

Retailers are cautiously optimistic given Singapore is expected to see sustained economic growth and a return of tourist spending. As the government demonstrates its commitment to endemic living, Song expects retail sentiments to improve for the downtown core area and demand for retail spaces to increase in the near-term.

Looking ahead, Tay remains optimistic and expects retail indicators to improve for the rest of 2022 in a broad-based recovery.

However, headwinds from inflationary pressures and supply chain disruption pose challenges to retailers, creating labour shortages and higher operating costs, cautions He. In addition, higher interest rates and recession risks could curtail retail spending.

“Prime retail is unlikely to see a full recovery until tourist numbers recover to pre-pandemic levels, and until travel restrictions in North Asia are lifted,” says He. According to the International Air Transport Association (IATA), this will only happen by 2023.

The muted upcoming new retail supply will support rent and occupancy improvement in the coming quarters. Tay expects prime retail rents to

increase between 2% and 4% for the whole of 2022.

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