Prime Retail Rents Islandwide 09 2Q2024 Knight Frank
According to a recent retail report by Knight Frank, the average prime retail rents in Singapore increased by 0.9% q-o-q and 3.8% y-o-y in 2Q2024, reaching $27.40 psf per month (psf pm). This growth is surprising, given the lower tourist arrivals in the second quarter after a short-lived boom due to high-profile concerts in the first quarter.
Although the top concerts by Taylor Swift and Coldplay in March brought in close to 1.5 million visitors, the number of tourist arrivals stabilised in the following months, with 1.4 million in April and 1.3 million in May and June respectively. As a result, Singapore’s total retail sales (excluding motor vehicles) fell from $3.5 billion in March to $3.3 billion in April, but rebounded to $3.6 billion in May, driven by food and alcohol spending. This indicates that retail activities have readjusted to sustainable levels in 2Q2024, following the concert-heavy first quarter.
Ethan Hsu, Knight Frank’s head of retail, also notes that prime office rental growth has slowed in the first half of 2024, with a 0.7% q-o-q increase in 2Q2024. The highest rental growth in 2Q2024 was seen in prime retail spaces in the city-fringe, which increased by 1.3% q-o-q to $23.70 psf pm. Suburban areas saw a 1.2% q-o-q increase to $26.50 psf pm, followed by the Marina Centre, City Hall, and Bugis area (1% q-o-q to $25.50 psf pm) and the Orchard area (0.6% q-o-q to $30.70 psf pm).
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Knight Frank’s definition of prime retail spaces includes rental-yielding units of 350 to 1,500 sq ft with the best frontage, connectivity, footfall, and accessibility in a mall, such as ground- or basement-floor retail mall units linked to an MRT station or bus interchange.
In the first half of 2024, prime rents islandwide have risen by 1.5%, driven by post-pandemic recovery and new store openings by both local and foreign brands. For example, British footwear retailer Hunter opened its first store in Singapore at Plaza Singapura, and French sportswear brand Hoka opened their store in Ion Orchard. The F&B sector also saw new entrants such as Ipoh Town, a Malaysian traditional coffee shop at Jewel Changi Airport, and Kebuke, a Taiwanese bubble tea chain at Taste Orchard.
Despite Singapore’s retail sector remaining attractive to retailers, Hsu points out that inflation and a strong Singapore dollar have slowed down growth as retailers face rising operating costs. Data from the Accounting and Corporate Regulatory Authority shows that retail and F&B business cessations reached 2,631 in 2Q2024, exceeding the number of new businesses formed during the same period (2,502). This is a reversal from the previous quarter, where there was a net increase of 295 new retail and F&B enterprises.
Given the uncertain environment, Hsu believes that prime retail rental growth will slow down in the remainder of the year, as rising costs could discourage retailers from expanding and lead to consolidation instead. However, he maintains his earlier projection that rents will grow between 2% and 4% for the whole year. In addition, Prime retail rents on Orchard Road have risen by 4.1% in 2023, making it the eighth-highest globally, according to a Savills report.