Two Tiered Retail Market 2Q2024 Central Region Rents Staying Flat

1. The retail market in Singapore is currently split into two tiers, with secondary locations experiencing weaker leasing demand while prime spaces see strong demand, according to Tricia Song, CBRE’s head of research for Southeast Asia. 2. In the second quarter of 2024, prime floor rents across the island saw a 1.1% increase, following a 1% rise in the previous quarter. 3. Song says that retailers are hopeful about the return of tourism and an increase in consumer spending after the distribution of Community Development Council (CDC) vouchers. 4. Wong Xian Yang, Cushman & Wakefield’s head of research for Southeast Asia, adds that the recovery of the tourism industry has had a positive impact on prime retail rents. He notes that with the Singapore-China mutual visa-free scheme, Chinese visitor arrivals have surpassed pre-Covid levels, and that arrivals from other traditionally top source markets such as Indonesia and India are also expected to increase over the next year. 5. Retailers from the food and beverage industry are the main drivers behind the demand for prime retail space, with some forming partnerships with other businesses. CBRE gives the example of Na Oh Korean restaurant partnering with an auto firm and a coffee-and-fashion company, while Cushman & Wakefield states that other popular industries include beauty and health, fast fashion and luxury brands. 6. Despite a large number of new-to-market brands entering Singapore’s retail market, CBRE’s Song emphasises that there have also been numerous closures and consolidations as retailers face challenges such as a shortage of manpower, competition from e-commerce, and higher operating costs. 7. Data from the Urban Redevelopment Authority (URA) indicates that the private retail sector saw its third consecutive quarter of positive net absorption in the second quarter of 2024. The net demand for space was 388,000 sq ft – the continuation of a trend that was seen in the first quarter of 2024, when 54,000 sq ft was absorbed. 8. The vacancy rate remained unchanged q-o-q at 6.6% in 2Q2024, as new supply entering the market was balanced out by resilient occupier demand, says Angelia Phua, JLL’s consulting director of research and consultancy. 9. According to CBRE, all submarkets except for Orchard Road experienced positive net absorption in the second quarter of 2024. Rental demand was particularly strong in the Outside Central Region (OCR) and Rest of Central Area (RCR), with net absorption of 237,000 sq ft and 65,000 sq ft, respectively. 10. Song explains that this is due to the completion of Pasir Ris Mall and New Bahru. However, the vacancy rate in the OCR rose to 4.6% in 2Q2024 from 4.4% in the previous quarter. In the RCR, the vacancy rate fell to 8.5% from 9% in 1Q2024. 11. Although the vacancy rate in Orchard Road rose to 6.7% in 2Q2024 from 6.6% the previous quarter, JLL’s Phua states that this was due to a marginal increase in new supply and no net absorption. She predicts that vacancy rates will remain low for the rest of 2024 in Orchard Road, adding that JLL expects prime floor rents to grow by 1.5% to 2.5% y-o-y in 2024. 12. Cushman & Wakefield’s Wong says that he believes only 150,000 sq ft of new retail space will be added to the Orchard Road market between 2024 and 2028. He gives examples such as the retail component of Grand Hyatt Hotel Singapore’s renovation, the redevelopment of The Cathay, and the redevelopment of Faber House.

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