Two Tiered Retail Market 2Q2024 Central Region Rents Staying Flat
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The retail market in 2Q2024 remained divided with prime spaces seeing an increase in rents while secondary locations saw softer leasing demand, according to data from Urban Redevelopment Authority (URA).”In the Central Region, retail space rents remained steady after a slight decline in the previous quarter,” shares CBRE head of research for Southeast Asia Tricia Song. She notes that islandwide prime floor rents had gone up by 1.1% q-o-q, extending the 1.0% q-o-q increase seen in the previous quarter. This growth has been driven mainly by the F&B sector, with concepts like Na Oh Korean restaurant partnering with Korean auto firm Hyundai Motor Group and coffee-and-fashion company Alchemist.
Retailers continue to have hope for a recovery in tourism and consumer spending with the disbursement of Community Development Council (CDC) vouchers, observes CBRE.
Notably, the retail market in 2Q saw a favorable rise in demand for prime retail space, driven by F&B operators, beauty & health, and fashion brands. This has been complemented by the continuous influx of new-to-market brands entering Singapore, notes CBRE’s Song.
However, the overall retail sector has also faced challenges due to the labor shortage, competition from e-commerce, and rising operating costs, which have led to numerous closures and consolidations by retailers.
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Across the submarkets, positive net absorption was recorded in all areas except for Orchard Road, which saw no net absorption in 2Q2024. The Outside Central Region and Rest of Central Region posted the strongest take-up in the quarter, recording positive net absorption of around 237,000 sq ft and 65,000 sq ft, respectively.
CBRE’s Song also attributes this strong performance in the OCR and RCR submarkets to the completion of Pasir Ris Mall and New Bahru in 2Q2024. Consequently, the vacancy rate in the OCR rose to 4.6% while the vacancy rate in the RCR dropped to 8.5%.
The Central Region’s vacancy rate remained stable in 2Q2024 at 7.7%, and occupancy in the Rest of Central Area improved by 0.7 percentage points to 8.8%. JLL consulting director of research and consultancy Angelia Phua highlights that this resilient occupier demand, coupled with moderated supply, has helped to drive down retail vacancy rates.
The improved occupancy in the Central Region is expected to continue for the rest of the year, primarily due to the moderated supply pipeline. However, CBRE’s Song predicts that the strong appetite for prime retail space in the OCR and RCR submarkets could lead to a lower vacancy rate for 2024.
Overall, JLL expects prime floor rents to grow by 1.5% to 2.5% y-o-y in 2024. According to C&W head of Southeast Asia research Wong Xian Yang, the current pipeline for new retail supply between 2H2024 and 2028 forms only 9% of the projects planned in the Orchard area. Some of these developments include the retail spaces in the upcoming Grand Hyatt Hotel Singapore and the redevelopment of The Cathay, which are set to be completed in 2024. The redevelopment of Faber House to include a hotel and retail component is expected to be completed in 2026.