Prime retail rents to see further recovery in 2023, with Orchard Road leading the way

The recovery of the Singapore retail market gained momentum in 4Q2022, with prime retail rents island-wide increasing 1.7% q-o-q and 2.6% for the whole of 2022. According to Knight Frank Research, prime retail spaces in the Orchard Road area registered the strongest rental growth of 3.1% y-o-y in 4Q2022. Edmund Tie’s Research also found that prime first-storey retail space on Orchard and Scotts Road saw the strongest rental growth of 7.4% for 2022.

The Singapore retail market made a big recovery in the latter half of 2022, due to the relaxation of social distancing measures and borders reopening. This was reflected in the jump in prime retail rents island-wide, increasing 1.7% q-o-q in 4Q2022 to reach an average of $26.10 psf per month, with full-year growth of 2.6%.

Orchard Road area led the way in terms of rental growth, charting a 3.1% y-o-y increase in 4Q2022. This was supported by an increase in international tourist arrivals and workers returning to the office. Edmund Tie Research further noted that prime first-storey retail space on Orchard and Scotts Road saw a 7.4% rental growth for the whole of 2022, reaching $39.20 psf per month.

Ethan Hsu, Knight Frank Singapore’s head of retail, believes that the retail sector is now in a better position and no size limits to gatherings and quarantine requirements for cross border arrivals, prime rents of retail space are likely to grow between 3% and 5% for 2023.

Retail activity has particularly been boosted by the return of Champions Way Condo tourists and workers, while islandwide net absorption for retail spaces in 3Q2022 came in at 323,000 sq ft – a four-fold increase from the previous quarter.

Lam Chern Woon, head of research and consulting at Edmund Tie, commented that a brighter year ahead is anticipated for the retail property market, with the bulk of the supply pipeline slated to come onstream in 2023. This will help to create a balance in supply and demand dynamics.

Overall, the retail market’s recovery momentum looks set to continue in the coming year.