Ion Orchard (Photo: Samuel Isaac Chua/The Edge Singapore)
SINGAPORE (EDGEPROP) - Retail space rents decreased by 0.4% in 1Q2022, reversing from the 0.6% increase charted in the previous quarter, according to data released by Urban Redevelopment Authority (URA) on April 22.
“The Omicron wave during the quarter amid rising inflation woes may have driven retail tenants to reassess their space requirements and caused some to shed spaces,” says Lam Chern Woon, head of research and consulting at Edmund Tie.
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Prices of Singapore retail space also decreased by 1.4% q-o-q in 1Q2022, back-pedalling from the 1.9% increase in the previous quarter. Apart from the Omicron wave, global uncertainties such as the ongoing Russia-Ukraine war, disrupted global supply chains and lockdowns in China may have also further subdued business sentiment, says Leonard Tay, head of research at Knight Frank Singapore.
Source: URA
Island-wide vacancy rates stood at 8.3% in 1Q2022, slightly higher than the 8.1% recorded in 4Q2021. According to Wong Xian Yang, head of research, Singapore at Cushman & Wakefield, the higher rates were underpinned by the downtown core area which saw vacancy rates rise from 11.1% in 4Q2021 to 12.8% last quarter. This follows a reduction in net demand in the downtown core by 129,000 sq ft, potentially driven by the Omicron wave which halted back-to-office recovery momentum earlier this year.
Angeline Phua, JLL’s consulting director, research and consultancy in Singapore, also attributes the higher vacancy rates islandwide to a cutback in demand for large-format spaces. For example, the closure of department store One Assembly by BHG at Raffles City and Filmgarde cinema at Bugis+ last quarter released approximately 57,000 sq ft and 30,000 sq ft of space into the market respectively.
Still, vacancy rates in Orchard remain stable at 11.3%. “Orchard remains an attractive expansion destination for new-to-market and luxury brands,” Cushman & Wakefield’s Wong explains, noting that local brands and e-retailers have also leveraged on the lower rents and higher vacancy to secure prime spaces in the Orchard area. Similarly, suburban retail vacancy rates have also remained resilient, standing at 6.1% in 1Q2022, as hybrid work and nearby residential catchments continue to support demand.
Source: URA
Moving forward, the relaxation in Covid-19 measures — which came into effect from March 29 — are expected to give a much-needed boost to retailers across the island. In the Downtown core area, the current return-to-office wave following the higher cap of 75% for staff allowed in the workplace is anticipated to bring back vibrancy. Meanwhile, the loosening of border restrictions is expected to revitalise the Orchard Road retail market, which is heavily dependent on tourist spending.
“Retailers can finally see the light at the end of the tunnel and are likely to be more confident in their expansion plans, notwithstanding additional challenges posed by inflationary pressures and manpower shortages,” says Catherine He, head of research for Colliers in Singapore.
Knight Frank’s Leonard Tay shares similar sentiments. Barring the emergence of a new Covid-19 variant, he predicts retail rents should bottom out this quarter before improving in the second half of the year. Knight Frank is projecting prime retail rents to grow between 2% to 4% this year.