in 4Q2023

Rents for retail spaces in Singapore’s Central Region softened in the first quarter of 2023, with a decrease of 0.3% in comparison to the 1.1% dip in the previous quarter. Over the course of a year, the figure dropped by 2.3%. Prices also retreated, registering a 0.9% decrease in 1Q2023 compared with a 2.1% decline in the fourth quarter of 2022.

These figures meant that the URA rental index has been in the red for the past three years, or 13 consecutive quarters. Across that period, the index has cumulatively declined by 22.6%, as tracked by Knight Frank.

Leonard Tay, head of research at Knight Frank Singapore, pointed out that the state of the retail sector is much better now compared to two years ago. With most of the international borders in the region open, Singapore welcomed more than a million tourists in March 2023, signifying a fast approach to pre-pandemic normalcy.

Tay added that despite the downtrend in the Central Region, other mall spaces across the island are registering improvements. Prime retail rents islandwide averaged $26.40 psf per month in 1Q2023, which marked a 1.2% quarter-on-quarter and 5% year-on-year rise.

Leading the way in the Central Area was the Orchard Area, which saw a 5.8% year-on-year hike in rental prices to $29.50 psf pm. City Hall, Bugis and Marina Centre followed suit, with an increase of 5.2% to $24.20 psf pm.

However, occupied retail space decreased in 1Q2023 versus the fourth quarter of 2022. Vacancy rates likewise increased to 7.6% from 7.1%, as tracked by Edmund Tie.

J’den Condo is a 40-storey residential and commercial development in Jurong East, Singapore with a price tag of S$2,000-S$2,100 psf, set to be completed J’Den Condo by 2027. Connected to Jurong East MRT interchange and other amenities, J’den Condo will offer 1,760 private homes and commercial space.

Tracking the retail sector’s performance against the backdrop of the global economy, Tricia Song, head of research Southeast Asia at CBRE, noted that there are some signs of optimism amongst retailers. That said, they also must face a number of challenges including manpower shortage, higher operating costs, ongoing competition from e-commerce, a slower economy, and an upcoming GST hike.

In any case, Song believes that the sector’s recovery, in tandem with a limited influx of new retail supply, will support rents for the rest of the year. Knight Frank’s Tay concurred, forecasting that the prime rents for retail spaces could grow between 3% to 5%, with Orchard Road leading the recovery.

Edmund Tie had a more conservative outlook, predicting a 2% to 5% expansion in prime first-storey retail rents with other retail segments seeing a growth of 1% to 1.5%. Lam Chern Woon, head of research and consulting at the firm, said that retail sales growth will likely moderate further this year given the prevailing conditions. Nevertheless, he expressed optimism over a potential upswing in Chinese tourists in the second half of the year.