Retail rents continue to recover amidst improve shopper traffic and retail sales

Prime retail rents increased for the first time in four years.

Retail rents continue to recover for the rest of 2022 and into 2023 on the back of improved shopper traffic and retail sales, according to a report by CBRE.

Retail indicators continued to improve alongside the easing of the border and domestic restrictions from April 2022. Retail sales (excluding motor vehicles) for July and August 2022 grew by 14.6% and 13.9% year-on-year (YoY) respectively, on the back of higher sales in the wearing apparel & footwear industry. 

CBRE said there was more optimism this quarter, as tourists and business travellers coming in for the FormulaOne Singapore Grand Prix and MICE events are anticipated to bring about increased footfall and retail spending.

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Leasing activity started to pick up in Q3 2022., with demand primarily driven by F&B operators. There were also a few local online fashions and athleisure retailers opening their maiden physical stores as they sought to capitalise on the reopening of Singapore’s borders and its economic recovery. CBRE Research observed that these stores occupied secondary corridors of prime shopping malls to enhance omnichannel experiences and showcase new collections. 

CBRE also said that islandwide prime retail rents increased for the first time in four years.

With increased return-to-office and recovering visitor arrivals, retail rents for Orchard Road, City Hall/Marina Centre and Fringe areas embarked on a nascent recovery in Q3 2022. CBRE Research data shows average prime floor rent in Orchard Road rose 0.7% quarter-on-quarter (QoQ) to $34.45 psf/mth, though it was still 10.9% below pre-COVID-19 levels. The suburban market continued to outperform due to its resilient local catchment, coupled with extremely limited availability. 

“In the near term, retailers may continue to face challenges such as manpower shortage, higher operating costs, ongoing competition from e-commerce, a potential economic slowdown and an impending GST hike in 2023. Nonetheless, with improved mobility and a below-historical average new retail supply in the next few years,” CBRE said.