Recurring waves of infections slam retail's chance at recovery

Retail sector has experienced the “most disruptions” with the changing restrictions.

The retail market’s chance at recovery has started to wane as Singapore reverts to stricter measures due to a resurgence of infections.

A report from Knight Frank showed that the retail real estate sector has experienced the “most disruptions” with the changing restrictions.

The report said the sector had “little choice but to adapt from one state of turmoil to the next.”

During the months of July and August when Phase 2 heightened alert was in place and dining in was not allowed, the proportion of online F&B sales out of total F&B sales were at 39.7% and 38.8%, respectively.

These numbers were lower than the May record at 48.2%. 

Analysts are also not expecting online F&B sales to revert back to the normalised rate of about 20% to 25% with the retightening of restrictions on gathering from Sept. 27 to Oct. 24.

“The opening up and then reverting to a more restrictive posture again and again throughout 2021 has not allowed the retail sector an extended run of stability in which to normalise business operations, and as a result any chance of broad-based recovery,” Knight Frank said in its report.

The central business district was also hit hard by the changing restrictions as island-wide prime retail rents declined 1.9% quarter-on-quarter (q-o-q) or 6.1% y-o-y to S$25.70 psf pm.

The  fall-off was primarily driven by the  decline in the average gross rent of prime retail spaces in the Marina Centre, City Hall, and Bugis regions where employees have already returned to the work-from-home setup. 

Analysts warned of a bottoming out in average gross rents of prime retail rents in the central business district “if there are no further disruptions to the retail market in the last quarter of the year,”

While analysts are seeing signs of stabilization in the  retail real estate sector, they said it's recovery remains “uncertain and tentative.”

“Barring any recurring implementation of stricter measures in the remaining three months of the year, and with the prospect of more vaccinated travel lanes, the retail sector is poised to make a gradual recovery in 2022,” Knight Frank analysts said.