Ethan Hsu, head of retail at Knight Frank, expects retail rents to grow between 2 and 4 percent for the full year (Photo: Samuel Isaac Chua/EdgeProp Singapore)
SINGAPORE (EDGEPROP) – Average prime retail rents islandwide rose 0.9% quarter-on-quarter and 3.8% year-on-year to reach $27.40 per square foot per month (psf pm) in Q2 2024, according to a July retail report from Knight Frank. The growth comes despite lower tourist numbers following a short-lived boom due to high-profile concerts in the first quarter of the year.
While concertgoers of Taylor Swift and Coldplay pushed visitor numbers to a high of almost 1.5 million in March, tourist arrivals stabilized in the last quarter, with 1.4 million visitors counted in April and 1.3 million in each of May and June.
Singapore’s total retail sales (excluding motor vehicles) fell from $3.5 billion in March to $3.3 billion in April, in line with lower footfall. However, there was a rebound to $3.6 billion in May, driven by spending on food and alcohol. Retail activity appears to have settled back to sustainable levels in Q2 2024 after the concert-heavy months in Q1 2024, notes Ethan Hsu, head of retail at Knight Frank.
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Prime retail space in the city’s outskirts recorded the highest rental growth in Q2 2024, rising 1.3% qoq to $23.70 per sq ft per month. Prime rents in the suburbs rose 1.2% qoq to $26.50 per sq ft per month, followed by Marina Centre, City Hall and Bugis area (up 1% qoq to $25.50 per sq ft per month) and Orchard area (up 0.6% qoq to $30.70 per sq ft per month).
Knight Frank defines prime retail space as rentable units of 32 to 140 square metres with the best frontage, connectivity, footfall and accessibility in a shopping centre, such as retail units on the ground floor or basement of a shopping centre with access to a metro station or bus station.
As of H1 2024, prime rents across the island have increased by 1.5%, helped by the post-pandemic recovery and new openings by local and foreign brands, including British footwear retailer Hunter, which opened its first store in Singapore. Plaza Singapura and the opening of the French sportswear brand Hoka in Ion Orchard. The F&B sector was joined by newcomers Ipoh Town, a traditional Malaysian cafe at Jewel Changi Airport, and Kebuke, a Taiwanese bubble tea chain at Taste Orchard.
While Singapore’s retail sector remains attractive for retailers, Hsu points out that inflation and a strong Singapore dollar have dampened growth as retailers face rising operating costs.
Data from the Accounting and Corporate Regulatory Authority shows that there were a total of 2,631 retail and hospitality business closures in Q2 2024, up from the 2,502 business closures in the same period. This is a reversal from the previous quarter, when there was a net increase of 295 new retail and hospitality businesses.
In this uncertain environment, Hsu believes rent growth in prime retail areas is likely to slow for the rest of the year, as rising costs could potentially hinder retailers’ expansion and force consolidation instead. Still, he expects rents to continue to grow between 2% and 4% for the full year, unchanged from his previous forecasts.
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