Orchard prime retail space sees strong take-up in 1Q2024 with Central Area rents up 0.2% q-o-q
In 1Q2024, retail space rents in the Central Region fell marginally by 0.4% q-o-q, extending the decline of 0.1% q-o-q the previous quarter. However, islandwide prime floor rents were up by 1% q-o-q, after a 1.2% q-o-q rise the previous quarter.
“The retail market continues to be twotiered,” says Tricia Song, CBRE head of research for Singapore and Southeast Asia. Secondary locations continue to see softer demand for retail space compared to prime space.
The Orchard area saw the strongest take-up in retail space during the quarter, with net demand of 43,000 sq ft or 80% of total take-up in the Central Area. Retailers in the Orchard area were spurred to take up more space as tourist arrivals in 1Q2024 surged 49.6% y-o-y, bolstered by a five-fold increase in Chinese visitors, says Song.
Vacancy rates in the Orchard area fell to 6.4% in 1Q2024 from 8.7% in 4Q2023, the lowest since the onset of the pandemic.
Retail rents in the Central Area nudged up 0.2% q-o-q, primarily due to the Orchard area, says Wong Xian Yang, Cushman & Wakefield (C&W) head of research for Singapore and Southeast Asia. In contrast, retail rents in the Fringe Areas fell 1.8% q-o-q in 1Q2024.
Fine jewellery chain Swarovski opened its largest store of about 2,300 sq ft at Wisma Atria. Homegrown womenswear brand Klarra’s opened a 1,500 sq ft flagship boutique at ION Orchard. With improved retail demand, malls such as Paragon and Wisma Atria attained full occupancy by the end of 2023, says C&W’s Wong.
The Outside Central Region (OCR) saw a negative net absorption in retail space of about 54,000 sq ft in 1Q2024. Vacancy rate in the OCR increased to 4.4% in 1Q2024 from 3.9% in the previous quarter. CBRE attributes it to consolidation in selected trade sectors and resistance to high rents.
Still, underpinned by resilient local consumption and shopper traffic above pre-Covid levels, retailers continued to seize prime retail spaces in the OCR, says C&W’s Wong. For instance, the Chinese activewear brand Beneunder chose to debut at Westgate Mall in Jurong East last year. Hong Kong cosmetics chain Sa Sa reopened at Jurong Point last quarter and is opening three more outlets in the OCR in 2Q2024.
Angelia Phua, JLL Singapore consulting director for research & consultancy, notes that higher operational costs, keen competition, unpopular retail concepts and changing consumer preferences have also led to some store closures and a rise in vacancy rates.
For example, fashion brand Zara closed its store in Marina Square mall while Times Bookstores shuttered its outlets in Plaza Singapura and Waterway Point. After launching here two years earlier, South Korean convenience store Emart24 shut all three outlets in Singapore in March. Tom & Stefanie, a children’s fashion retailer, closed its outlet at West Mall after 25 years.
However, the pipeline of business travel and meetings, incentive travel, conventions and exhibitions (BTMICE), improved flight connectivity and capacity with the upcoming Changi Terminal 5 will further boost the tourism recovery and, in turn, the retail sector, notes JLL’s Phua.
URA data showed prices of retail assets were up 1.8% q-o-q in 1Q2024, marking the fourth straight quarterly rise. Phua attributes the increase in asset prices to investors allocating more capital to quality retail assets. Investors are drawn to the sector due to the favourable supply-demand fundamentals, positive yield spread over funding costs and scarcity value of such assets.