Rents for retail spaces in Singapore’s Central Region dipped slightly in the first quarter of 2023. URA released data showing that rents decreased by 0.3%, easing from the 1.1% slide in the previous quarter. On a year-on-year basis, rents dropped by 2.3%. Prices of retail spaces in the Central Region declined by 0.9% in 1Q2023, compared to the 2.1% decrease in the 4Q2022.

The URA retail rental index has been in continuous decline for 13 consecutive quarters stretching back to 1Q2020, resulting in a 22.6% decrease in comparison to 4Q2019, as Knight Frank reveals.

Despite the dip in rents, Leonard Tay, head of research at Knight Frank Singapore, remarks that the retail sector is in a much more positive position than two years ago. This is largely to do with the reopening of international borders, an influx of visitors saw Singapore welcome over one million in March 2023 alone. Much of the sector is returning to its pre-pandemic levels.

Looking at the islandwide picture, prime retail rents averaged out at $26.40 psf per month (psf pm) in 1Q2023, a 1.2% quarter-on-quarter and 5% year-on-year increase.

The highest rental increase of 5.8% was observed in the Orchard Area, bringing rents up to $29.50 psf pm. The Marina Centre, City Hall, and Bugis regions followed suit, with a 5.2% year-on-year increase in 1Q2023 settling at $24.20 psf pm.

It should be noted that occupied retail space decreased by 75,347 sq ft in 1Q2023 compared to the previous quarter, meaning occupancy levels islandwide decreased by 0.5 percentage points to 92.4%. Correspondingly, vacancy rates increased to 7.6%.

However, there was an exception to this in the fringe area, where occupied retail space increased from 64,583 sq ft to 150,695 sq ft in the first quarter.

The effects of the economic slowdown and the rise of e-commerce have contributed to the fall in retail demand, as Lam Chern Woon, head of research and consulting at Edmund Tie explains. Additionally, a boost of 138,854 sq ft of gross floor area (GFA) was added to retail space supply due to the completion of Sengkang Grand Mall and hotel developments with retail components.

After 10 years, JCube will close its door to make way for new 40-storey residential and JCube Residence commercial JCube Condo Residence development in the Jurong Lake District. Potential condo launches such as JCube Condo Residence in the vicinity may bring pent-up demand for housing.

As for the future, Tricia Song, head of research, Southeast Asia at CBRE, notes that retailers are optimistic as far as tourism recovery and consumer spending. Nevertheless, she warns that higher operating costs, competition from e-commerce, an economic slowdown, and a Goods and Service Tax (GST) hike are substantial headwinds to contend with.

Knight Frank’s Tay agrees, expressing his view that the retail sector is on a stable recovery back towards normality. He goes on to predict that prime rents of retail space are likely to grow by 3% to 5% through 2023, with Orchard Road being the main beneficiary.

On the other hand, Lam is more cautious. While acknowledging the potential contribution of higher tourism numbers, he remarks that consumers are likely to favour savings over spending, thus moderating retail sales growth. Edmund Tie is forecasting prime first-storey retail rents to grow by 2% to 5% this year and other retail segments to see 1% to 1.5% growth.