2023 will witness a further improvement in prime retail rents, with Orchard Road setting the pace

The revival in the Singapore retail sector gained momentum during the latter portion of last year’s second quarter, because of social distancing rules being eased and the reopening of borders. “The retail industry endured and is now through an extremely challenging time of unprecedented pressure, but is now getting started to gain momentum from the lifting of restrictions starting in 2Q2022” remarks Ethan Hsu, Knight Frank Singapore’s retail head.

According to the data from Knight Frank Research, prime retail rents across the island increased 1.7% q-o-q in 4Q2022 to average $26.10 per month. This brings the total prime retail rents up to 2.6% for 2022.

Marina View Residences condo floor plan of 84,000 sq ft site enjoys a maximum GFA of 1.09 million sq. ft. There’s an optional 21,528 sq ft of commercial space and 21,528 sq ft of retail space.

In its report on the retail sector for 4Q2022, Knight Frank notes that prime retail space within areas like the Orchard Road area led the way in terms of growth in rental and recorded an average increase by 3.1% y-o-y in 4Q2022 to $29.10 per month. This was then followed by prime retail spaces within the Marina Centre, City Hall and Bugis sub-markets, which recorded an increase in the range of 2.6% y-o-y to $23.90 per month. The increase in rent was accompanied by an increasing number of tourists from abroad and returning workers to work.

A different report from Edmund Tie Research also highlights evidence that further indicates the growing the demand for retail space in the Orchard region. Based on the track of retail assets by the company, the prime retail spaces on the first floor of Orchard along with Scotts Road saw the strongest rent increase that was 7.4% for the whole of 2022. It was $39.20 per month. In the suburban and fringe areas, rents increased in the range of 6.7% in 2022 to $33.10 per month. however, in other cities the rent increased in 3.7% to $19.20 psf per month. This is based on Edmund Tie’s statistics.

Edmund Tie’s study reveals the fact that during 3Q2022, the island’s retail spaces’ net absorption was recorded at 323,000 sq ft. This is more than four times the 86,000 sq feet recorded in the previous quarter, which indicates an increase in demand.

Lam Chern Woon, head of research and consulting at Edmund Tie, expects a better year in the retailer property market, aided by the ongoing growth in the tourism industry. “With the majority of the pipeline for supply set to start coming on stream in 2023, such as The Woodleigh Mall, and retail shops in One Holland Village, Guoco Midtown and IOI Central, the supply-demand patterns are likely to be in balance in the coming year.” He adds.

The company is forecasting that prime retail rents on the first floor within Orchard as well as Scotts Road to sustain its increase of seven% to 9% by 2023. rents in other sub-markets of retail are expected to increase by between% to 6%.

Knight Frank’s Hsu forecasts premium retail rental rates to keep increasing this year, pointing out that the retail industry is “in much better shape right now” considering account the growth on taxation of Goods and Services Tax (GST) and a more muted economic outlook. “So long as there’s no limit to the number of people who can gather and restrictions on quarantine for international arrivals, prime rents for retail spaces are expected to increase between 3% to 5% over the course of 2023 with affluent shopping mall Orchard Road leading the recovery,” he predicts.