New-to-market international retailers have jumped onto the scene in 3Q2023, propelling the occupancy of prime retail spaces in the Central Region, with Orchard Road leading the way. F&B, fashion, and lifestyle brands are all competing for recognition, with some hoping to utilize Singapore as a launching pad for regional expansion, as noted by Wong Xian Yang, the Head of Research for Singapore and Southeast Asia at Cushman & Wakefield.
The summer of 2023 saw the openings of multiple international outlets, with French patisserie Cedric Grolet first to open up its Asian outlet in Como Orchard. Chinese activewear brand Neiwai and Finnish clothing brand Marimekko opened their first Southeast Asian stores in Raffles City and Ion Orchard respectively. Swiss brand Clinique La Prairie and its business partner RichL Group opened a holistic health boutique in Marina Bay Sands Hotel Tower 3, and Taiwanese frozen ice-cream chain Frozen Heart opened its first overseas outlet at Jewel Changi.
Also making its presence known is the Australian beverage brand Chaffic, which set up at Westgate, Philippine avocado dessert company Avocadoria in Ang Mo Kio Hub, and the international doughnut chain Mister Donut in Junction 8.
Augmented by the ongoing grocery-shopping trend, social media platforms have directed “viral bursts of sensational shopper interest and crowds” to local lifestyle brands such as The Paper Bunny and Beyond The Vines, noted Leonard Tay, Head of Research of Knight Frank Singapore.
The rebound of the retail market has been especially visible in the Downtown Core, where net demand shot up by 118 403 sq ft in 3Q2023 on the back of the Phase 1 of Guoco Midtown and The M at Beach Road. What was the lowest vacancy rate at 7.3% since 4Q2019 of 7.9% was recorded by Tricia Song, Head of Research for Singapore and Southeast Asia at CBRE.
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Islandwide, retail vacancy rates dropped by 0.3 percentage points to 7.2% in 3Q2023. Central Region vacancy rates followed suit with a lowering of 0.4 percentage points to 8.8%. Outside Central Region vacancy rates slightly increased by 0.2 percentage points to 4.2%.
Rental rates, however, have seen a minor increase of 0.5% q-o-q in 3Q2023 and 0.3% q-o-q in 2Q2023, as stated by Tay. Rents and operating costs may restrain the upward motion of retail spaces, leading some retailers to consolidate their spaces in 3Q2023, as noted by Song.
Continuing economic dampening sentiments, however, do not have retailers feeling too optimistic. Wong believes Singapore’s resilient consumption demand will ultimately continue to attract more retailers and aid in backfilling vacant spaces.
A factor that may help the recovery of the Central Region’s retail market in the medium term is the projected range of 12 to 14 million visitors for the entire year by the Singapore Tourism Board. Visitors have totalled 10.1 million in the first nine months of 2023, according to JLL Research. The return of major Mice (meetings, incentives, conferences and exhibitions) events, as highlighted by Tay, and the revival of China’s outbound tourism are sure to bring about much-needed inflow.
Retail landlords may have to remain firm with their financial expectations, however, as higher labour costs and intensified competition may be other obstacles. For now, the retail market of Central Region awaits the next developments.