Retail sector hit by lower tourist arrivals but domestic spending remains resilient: CBRE

By Valerie Kor / EdgeProp Singapore | March 2, 2020 4:15 PM SGT
Brick-and-mortar retail sector will struggle as consumers prefer to stay indoors due to virus fears, but supermarkets, convenient stores and medical goods will see higher demand (Photo: Albert Chua/EdgeProp Singapore)
Brick-and-mortar retail sector will struggle as consumers prefer to stay indoors due to virus fears, but supermarkets, convenient stores and medical goods will see higher demand (Photo: Albert Chua/EdgeProp Singapore)
SINGAPORE (EDGEPROP) - For the retail sector, CBRE’s report “Real Estate Market Outlook 2020” predicts continued decline in tourist spending as a result of Covid-19 travel restrictions. STB has projected that tourist arrivals will drop 20% to 30% this year.
The loss of Chinese tourists in the first half of 2020 will especially impact the luxury retail sector and the MICE industry.
On the other hand, CBRE projects that domestic spending will remain resilient. Even though the brick-and-mortar retail sector will struggle as consumers prefer to stay indoors due to virus fears, supermarkets, convenient stores and medical goods will see higher demand. Businesses that offer online delivery and e-commerce services will also benefit.
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Retail trend by segments (Infographic: CBRE Research)
In terms of retail space, the supply pipeline in Singapore is expected to drop significantly to 280,000 sq ft, from 1.06 million sq ft in 2019. This lower supply commensurates with the lower level of demand. As of 4Q2019, total private retail stock stands at 50.19 million sq ft, including 4.33 million sq ft of vacant stock.
Retailers are expected to consolidate as they re-evaluate their store performance. While rents held steady through 2019 despite a muted retail sales environment, CBRE expects a dip of up to 2.0% for prime islandwide rents in 2020 with more pressure on secondary malls and floors.
Landlords have been offering incentives and pop-up spaces in 2019 to cope with lower consumption. There will be growing pressure for them to maintain rents and occupancy in 2020. CBRE expects that landlords will be more proactive in offering rental rebates and additional marketing strategy support.
CBRE recommends retailers to innovate in the meantime, through building on omni-channel strategies and enhancing last-mile delivery and fulfilment capabilities. This will prepare them to ride the wave of recovery when the virus outbreak is fully contained.
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