Retail sector in the Central and Orchard area revives

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/ EdgeProp Singapore
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November 4, 2022 9:30 AM SGT
The star performer in the Central Region is the prime Orchard Road area, where vacancy was down 0.9 percentage points to 10.8% in 3Q2022, from 11.7% in 2Q2022 (Photo: Samuel Isaac Chua/EdgeProp Singapore)
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SINGAPORE (EDGEPROP) - On Oct 28, Porsche Singapore — a joint venture between Eurokars Group and Porsche Asia Pacific — announced that it would be opening a Porsche Studio at Guoco Midtown in 1H2023. As the new retail anchor at Guoco Midtown, the Porsche Studio will occupy a two-storey footprint.
It will have a showroom facility with unique and historical displays of the German sports car alongside new car showcases. There will also be an integrated F&B experience, co-working and periodic exhibition spaces.
The Porsche Studio in Singapore will be the third such space in the Asia Pacific region. The other two Porsche Studios in the region are located in Bangkok, Thailand, at the luxury mall ICONSIAM and the Porsche Studio Hanoi in Vietnam, completed in 2021.
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The upcoming Porsche Studio at Guoco Midtown on Beach Road in the core CBD is the latest sign of the speed at which Singapore’s retail sector has rallied. According to URA data, islandwide net absorption saw a four-fold jump to 323,000 sq ft in 3Q2022 from 86,000 sq ft the previous quarter. The pick-up in demand was largely broad-based across all segments except the fringe area, which recorded a negative take-up.
Cityroom Porsche - EDGEPROP SINGAPORE
The Porsche Studio will be the retail anchor at Guoco Midtown. Occupying two storeys, it will have a showroom facility with special and historic displays of the German sportscar alongside new car showcases (Porsche Singapore)
With demand outpacing supply, the overall vacancy rate in the retail space dipped slightly by 0.4% points to 7.8% in 3Q2022 from 8.2% in the previous quarter. It was the lowest level recorded since the start of the pandemic in early 2020, says Lam Chern Woon, head of research and consulting at Edmund Tie.
In the Central region (which includes the core CBD), the vacancy rate fell to 9.3% in 3Q2022 from 9.8% the quarter before. Net demand in the Central region turned positive, with 269,000 sq ft of retail space absorbed in 3Q2022, up 56.4% from 172,000 the previous quarter.
STOCK VACANCY 3Q2022 URA - EDGEPROP SINGAPORE
Source: URA
The star performer in the Central Region is the prime Orchard Road area, where vacancy was down 0.9 percentage points to 10.8% in 3Q2022, from 11.7% in 2Q2022, says URA. Net demand in the Orchard area reached 54,000 sq ft in 3Q2022, a quarterly high since 4Q2017, observes Wong Xian Yang, head of research, Singapore at Cushman & Wakefield.
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“The demand for prime retail spaces in Orchard is picking up as retailers, both local and overseas, gained the confidence to expand given the tourism recovery,” adds Wong.
Ginza Xiaoma - EDGEPROP SINGAPORE
Ginza Xiaoma, the Japanese reseller of French luxury brand Hermes, opened a 2,583 sq ft boutique at Ngee Ann City in September (Photo: Samuel Isaac Chua/EdgeProp Singapore)

New-to-market brands

Several new-to-market brands opened in the prime Orchard Road area last quarter, which include Ginza Xiaoma, the Japanese reseller of the French luxury brand Hermes. It opened a 2,583 sq ft boutique at Ngee Ann City in September — the third across the region, following its flagship in Tokyo and Hong Kong.
This September, the Swiss-made watch brand Norqain debuted in Singapore with a new boutique in Wisma Atria. H&M Group’s cult label, & Other Stories, opened its first Southeast Asian store in Singapore’s ION Orchard in August.
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German sportswear maker Puma opened its largest outlet of 7,100 sq ft at 313@Somerset in July. Indonesian-based fashion label Claude opened its maiden brick-and-mortar store in Singapore at Takashimaya shopping centre at the end of July. Meanwhile, in August, homegrown sportswear brand Kydra’s flagship store also opened in Takashimaya.
“New-to-market streetwear brands are also sprouting up,” says Cushman & Wakefield’s Wong. Examples include the Korean label MLB, which opened at Mandarin Gallery in September. In October, sneaker platform SNKRDunk opened its first overseas flagship at Singapore’s Mandarin Gallery.
SINGAPORE MERLION PARK ONE FULLERTON - EDGEPROP SINGAPORE
In 3Q2022 alone, there were 2.2 million international visitors, with those from Indonesia, India, Malaysia and Australia being the four biggest contributors (Photo: Samuel Isaac Chua/EdgeProp Singapore)

Return of tourists

“The Orchard Area’s outperformance was unsurprising as the Great Singapore Sale (GSS) and various keynote events were held during the same period,” says Edmund Tie’s Lam. Examples include the Formula One (F1) Singapore Airlines Singapore Grand Prix 2022, Forbes Global CEO Conference and Milken Institute Asia Summit. He adds that these events have supported the continual rise in tourist arrivals and the resultant high footfalls witnessed at malls in the tourism-dependent area.
Visitor arrivals to Singapore climbed for the eighth consecutive month to 778,141 in September, up from 728,744 in August, according to Singapore Tourism Board statistics. This brings total visitor arrivals for the first nine months of 2022 to 3.7 million. In 3Q2022 alone, there were 2.2 million international visitors, with those from Indonesia, India, Malaysia and Australia being the four biggest contributors.
VISITOR ARRIVALS - EDGEPROP SINGAPORE
VISITOR ARRIVALS TREND - EDGEPROP SINGAPORE
Charts: Singapore Tourism Board
“With this year’s F1 setting a new record for the highest attendance in the race’s 13-year history, entertainment, lifestyle, and F&B outlets benefited from the slew of shoppers and diners providing a much-needed shot-in-the-arm, after two years of the pandemic,” says Ethan Hsu, head of retail at Knight Frank.
Retail sales rose by 17.5% to a combined $6.8 billion in July and August 2022 compared to the same period a year ago, notes Hsu. Excluding February, monthly retail sales since November 2021 were above the average sales level of about $3.2 billion reported throughout pre-pandemic 2019. He adds that demand from locals and the return of tourists generated a resurgence of retail sales activity in 3Q2022.
The retail sales index (excluding motor vehicles) maintained uninterrupted y-o-y growth for six consecutive months. The latest in August registered an index of 101.8, a 13.0% increase from 90.1 in the same month last year.
“The biggest jump came from clothing and footwear, food and alcohol, and department store industries, which reported at least a 35% y-o-y growth during the month as shoppers returned to stores and malls in revenge spending sprees,” says Hsu. “Without disruptions from mobility restrictions, the retail sector has been steadily improving month after month.”
OTHER STORIES - EDGEPROP SINGAPORE
H&M Group’s cult label, & Other Stories, opened its first Southeast Asian store in Singapore’s ION Orchard in August (Photo: Samuel Isaac Chua/EdgeProp Singapore)

Evolving retail space

As Singapore normalises and adjusts to life after the pandemic, the retail market will continue to evolve, says Hsu. The pace has accelerated too. Department stores have lost their dominance in malls, giving way to more diverse themed lifestyle stores like Daiso, Don Don Donki, Decathlon and Muji. “Demand for such stores will drive expansion plans of these key players in Singapore over the next few years,” he adds.
In the F&B scene, the Japanese grill house GyoGyo opened at Funan Centre in July, while the award-winning Chinese restaurant Meow Barbeque opened at Bugis+ in September.
In early October, homegrown furniture brand Castlery opened its largest showroom of 24,000 sq ft at Liat Towers. Other brands that have expanded their footprint and absorbed large-format spaces in the retail scene in 3Q2022 included gaming arcade Timezone, Toys“R” Us, and food court operators Malaysia Boleh! Kopitiam Food Hall.
“There was healthy occupier demand from new-to-market retailers and brand expansions from various trade types in 3Q2022,” says Angelia Phua, consulting director, research and consultancy, Singapore at JLL.
CLAUDE NGEE ANN CITY - EDGEPROP SINGAPORE
New-to-market retailers include Indonesian-based fashion label Claude opened its maiden brick-and-mortar store in Singapore at Takshimaya shopping centre at the end of July (Photo: Samuel Isaac Chua/EdgeProp Singapore)

Rental rates, prices continued to descend in 3Q2022

Despite the recovery, retail rents dipped 0.4% q-o-q in 3Q2022, extending its 0.5% q-o-q decline from the previous quarter. “Overall retail rents in the Central region remained soft as landlords accepted lower rents to shore up occupancy in non-prime retail space,” says Cushman & Wakefield’s Wong. “A bottoming out of Central region retail rents could be on the horizon as the pace of decline has slowed over the last few quarters.”
The URA’s retail property price index for the Central Region also declined for the third consecutive quarter, falling 3.2% q-o-q in 3Q22, extending the 1.2% q-o-q decline in 2Q2022. This was likely driven by falling retail rents in 3Q2022 and investor expectations of higher property yields in a rising interest rate and inflationary environment, as well as recessionary concerns, says JLL’s Phua.
PRICE RENTAL CHARTS URA - EDGEPROP SINGAPORE
Source: URA
“While retailer confidence remained positive over the sustained reopening of the economy, protracted inflationary pressure and recessionary headwinds likely led to caution and rent hike resistance that resulted in falling rents in 3Q2022,” adds Phua.
Edmund Tie’s Lam agrees. “Retailers are understandably cautious on overcommitting to high rents in this sombre climate,” he says. However, he adds that rental recovery is already in place for prime Orchard and suburban malls.
Palais Renaissance on Orchard Road - EDGEPROP SINGAPORE
Palais Renaissance on Orchard Road officially reopened in early October after a revamp that introduced new dining concepts and layouts (Photo: City Developments Ltd)

‘New’ pipeline

Edmund Tie says that as of 3Q2022, the total retail space projected to come onstream stood at 5.2 million sq ft (gross), or 8% of existing stock. The pipeline expected from 2022 and beyond remains tight, with most of the upcoming pipeline emerging from the fringe and suburban areas. In addition, the pipeline comprises mainly enhancements to existing malls or ancillary retail space, new hotel developments and mixed-use office buildings.
Palais Renaissance on Orchard Road officially reopened in early October after a revamp introducing new dining concepts and layouts. Meanwhile, asset enhancement works are ongoing at Wisma Atria. They are scheduled to be completed by the end of 2022, notes Starhill Global REIT in its 1Q2022 and 2023 business update on Oct 27.
Enhancements to retail assets include the July announcements of the revamp of *SCAPE in Orchard and the repositioning of CapitaLand Integrated Commercial Trust’s (CICT) CQ @ Clarke Quay. CICT also completed the revamp of Raffles City, which saw the introduction of new beauty, fashion and lifestyle brands.
“Landlords have seized the opportunity to conduct timely renovations and facelifts for their malls and refresh their tenant mix offerings to stay relevant and attract shoppers to physical spaces,” notes Edmund Tie’s Lam.
CQ @ Clarke Quay - EDGEPROP SINGAPORE
CapitaLand Integrated Commercial Trust intends to reposition CQ @ Clarke Quay (Photo: Samuel Isaac Chua/EdgeProp Singapore)

Enhanced shopping experience

Against the backdrop of an increasingly competitive retail landscape posed by the popularity of e-commerce platforms and the rise of social commerce, retailers have been developing enhanced shopping experiences such as introducing short-term concept pop-up stores, creating exciting collaborations between different complementary retail sectors and providing more personalised in-store shopping experience, observes Edmund Tie’s Lam.
In early August, Zalora launched a supermart-style pop-up shop with Adidas at Bugis Junction. Lancome’s Beauty Tech Flagship was held outside the Mandarin Gallery that same month. Recent pop-ups include the Chanel J12 pop-up at Ngee Ann City in September and Prada Paradoxe pop-up at Paragon in October.
Lam also sees an “exciting transformation” in the traditional physical retail landscape as retailers continue to “bring cohesion between the online retail experience and in-store experience”. The updated Retail Industry Transformation Map 2025, which focuses on local brands, innovation and talent, is anticipated to pave the way for innovation in the retail scene, he adds.
Wisma Atria - EDGEPROP SINGAPORE
Ongoing asset enhancement at Wisma Atria is scheduled for completion by end-2022 (Photo: Samuel Isaac Chua/EdgeProp Singapore)

‘Cautiously optimistic’

Retailer and consumer confidence are expected to remain “cautiously optimistic” on the back of Singapore’s sustained economic reopening, says JLL’s Phua. “Domestic consumption growth, underpinned by wage growth in a tight labour market, and tourism growth should continue to spur strategic business expansion,” she says.
This should push vacancy rates lower amid limited supply while supporting rent growth of prime floor space, adds Phua. Rents of prime floor space in JLL Research’s retail assets portfolio are expected to rise by an average of 2% to 3% y-o-y in 2022.
However, persistently high inflation and uncertainties such as the possible emergence of new Covid-19 variants and any retightening of safety or border measures may affect retail sentiment and consumer confidence, which may cap consumer spending and put a lid on retail rental growth, cautions Edmund Tie’s Lam.
313@SOMERSET - EDGEPROP SINGAPORE
Retailer and consumer confidence are expected to remain “cautiously optimistic” on the back of Singapore’s sustained economic reopening (Photo: Samuel Isaac Chua/EdgeProp Singapore)
He expects Orchard Road rents (prime first storey) to lead market recovery and clock around 10% rental growth, while other segments are poised for around 3% to 8% in 2022.
Significant cost pressures and headwinds in 2023 are expected to lead to slower rental growth of 8% to 9% for Orchard retail space (prime first storey) and 3% to 6% for other segments, respectively, says Edmund Tie.

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