APPD Market Report Article

Singapore

May 31, 2022

-3.1%

SGD 35.3

Rents
Rising

Healthy consumer spending despite COVID-19 restrictions

  • In 1Q22, the retail sales index (excluding motor vehicles) in chained-volume terms rose an encouraging 8.6% y-o-y, reflecting healthy consumer spending during the Lunar New Year festive period and as workers returned to the workplace. Average monthly retail sales value (excluding motor vehicles) in 1Q22 surpassed that of the corresponding quarter in 2019.
  • Singapore’s preparedness in handling the latest surge in COVID-19 cases further boosted consumer and business confidence in 1Q22. This was due to high vaccination rates protecting against the Omicron variant, a successful home recovery programme and a working healthcare system.

Overall vacancy rates hold relatively stable in 1Q22

  • i12 Katong reopened in March 2022, after its soft launch in December 2021.
  • Occupiers of large format spaces, such as department stores and cinemas consolidated operations in Secondary and Suburban malls in the quarter due to changing consumer preferences and declining sales. As a result, vacancy rates rose q-o-q in 1Q22 in these two submarkets. The vacancy rate in the Prime submarket, however, continued to decline q-o-q in the quarter.

Rents rise marginally in 1Q22 across the three submarkets

  • Rents of prime floor space remained firm, rising marginally q-o-q in 1Q22 for the second consecutive quarter across the three submarkets. The government’s commitment towards endemic COVID-19 and the gradual reopening of the Singapore economy continued to lift business confidence and support rents.
  • The resumption of quarantine-free travel on 21 January 2022 (following temporary suspension) and optimism on a tourism recovery supported rents in the Prime submarket. The gradual return of the office crowd to the workplace and the resilient resident demand in the Secondary and Suburban submarkets respectively also bolstered rents in these submarkets, despite the exit of large-space occupiers.

Outlook: Retail rental recovery in sight

  • Singapore’s extensive easing of COVID-19 measures and travel restrictions will offer another strong confidence boost to retailers and consumers. Domestic consumption growth and a tourism recovery should encourage business expansion amid a sustained economic reopening, despite inflationary concerns. Thus, the overall vacancy rate should fall y-o-y in 2022.
  • Rents are expected to rise in 2022 amid falling overall vacancy rates as the retail market outlook improves further on the back of a sustained reopening of the Singapore economy. Capital values are expected to grow in 2022 on the back of an expected rent recovery in 2022 and a scarcity of quality retail assets.

Note: Singapore Retail refers to Singapore's Prime, Secondary and Suburban retail markets.

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