The Singapore retail market began to show signs of recovery in the second half of last year, with social distancing measures relaxing and borders reopening. According to Knight Frank Research, prime retail island-wide rents rose 1.7% quarter-on-quarter in 4Q2022 to an average of $26.10 psf per month. This brings full-year rental growth to 2.6% for 2022.
Prime retail spaces in the Orchard Road area showed the Bukit Batok EC greatest rental growth of 3.1% year-on-year in 4Q2022 to $29.10 psf per month, followed by the Marina Centre, City Hall and Bugis sub-market with a growth of 2.6% to $23.90 psf per month. This was due to an increase in international tourists and the resumption of office work.
Further evidence of strengthening demand for retail spaces in the Orchard area can be seen in a report released by Edmund Tie Research. Independent tracking of retail assets showed that prime first-storey retail space on Orchard and Scotts Road registered the strongest rental growth of 7.4% for the entire year of 2022 to $39.20 psf per month. In the fringe and suburban areas, rents grew by 6.7% in 2022 to $33.10 psf per month, while in other city areas, it grew by 3.7% to $19.20 psf per month, according to Edmund Tie’s data.
In the third quarter of 2022, islandwide net absorption for retail spaces was 323,000 sq ft, a four-fold increase from the 86,000 sq ft registered the previous quarter. Lam Chern Woon, head of research and consulting at Edmund Tie, believes this points to a more positive outlook for the retail property market in the coming year, partly thanks to the revival of the tourism sector.
Ethan Hsu, head of retail at Knight Frank Singapore, is of the opinion that the retail sector is in a much better position now, despite the rise in Goods and Services Tax (GST) and a more subdued economic outlook. Hsu believes that as long as there are 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 the whole of 2023, with Orchard Road leading the recovery.