Prime Retail Rents Islandwide 09 2Q2024 Knight Frank
According to a July report by Knight Frank, prime retail rents in Singapore have continued to grow, with a quarterly increase of 0.9% and an annual increase of 3.8% in 2Q2024. The average prime retail rent across the island now stands at $27.40 psf per month (psf pm).
Despite a slight decline in tourist arrivals after the peak in March due to high-profile concerts by Taylor Swift and Coldplay, the tourism sector stabilized in the second quarter of the year. The total number of visitors in April, May, and June was recorded at 1.4 million, 1.3 million, and 1.3 million respectively.
With the concert-heavy months in 1Q2024, May saw a rebound in retail sales to $3.6 billion, primarily driven by spending on food and alcohol. This suggests that the retail sector has adjusted to sustainable levels in 2Q2024, according to Ethan Hsu, Knight Frank’s head of retail.
In terms of rental growth, prime retail spaces in the city-fringe saw the highest increase of 1.3% q-o-q to reach $23.70 psf pm in 2Q2024. This was followed by a 1.2% q-o-q increase in suburban areas to $26.50 psf pm, a 1% q-o-q increase in the Marina Centre, City Hall, and Bugis area to $25.50 psf pm, and a 0.6% q-o-q increase in the Orchard area to $30.70 psf pm.
Knight Frank defines prime retail spaces as units of 350 to 1,500 sq ft with the best frontage, connectivity, footfall, and accessibility in a mall. These include ground- or basement-floor units linked to an MRT station or bus interchange.
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In 1H2024, prime retail rents across the island have seen a 1.5% increase, thanks to the post-pandemic recovery and new store openings by local and foreign brands. For instance, British footwear retailer Hunter opened its first store in Singapore at Plaza Singapura, while French sportswear brand Hoka opened in Ion Orchard. Newcomers to the F&B sector include Ipoh Town, a Malaysian traditional coffee shop at Jewel Changi Airport, and Kebuke, a Taiwanese bubble tea chain at Taste Orchard.
Despite the attractiveness of the retail sector to retailers, Hsu notes that inflation and a strong Singapore dollar have softened growth as retailers face higher operating costs. Data from the Accounting and Corporate Regulatory Authority shows that there were 2,631 retail and F&B business cessations in 2Q2024, outnumbering the 2,502 businesses formed during the same period. This is a reversal from the previous quarter, where there was a net increase of 295 new retail and F&B enterprises.
In light of the uncertain environment, Hsu predicts that prime retail rental growth will likely be slower for the remainder of the year, due to the rising costs that may discourage retailers from expanding and instead compel them to consolidate. Nonetheless, he maintains his earlier projection of a 2% to 4% growth in rents for the whole year.