APPD Market Report Article


September 4, 2023

Angelia Phua, Director - Research, Singapore


SGD 36.5


Occupier demand remains resilient across all submarkets

  • Retail sales growth remained resilient but tapered as inflationary factors prompted consumers to exercise caution in their expenditures. In 2Q23, the retail sales index (excluding motor vehicles) in chained volume terms, rose 1.6% y-o-y, compared to 2.5% y-o-y in 1Q23. Tourist arrivals of 6.3 million between January and June 2023 displayed sustained growth.
  • In 2Q23, the resilient domestic consumer market and the sustained tourism recovery continued to support occupier demand with the entry of new-to-market brands and the expansion of existing brands. We observed resilient demand across various trade groups, including food & beverage operations, beauty establishments, luxury brands and medical services.

Vacancy rates extend decline across all submarkets in 2Q23

  • The opening of The Woodleigh Mall (with healthy occupancy) in May 2023 contributed to the increase in the Suburban retail stock in 2Q23. The future retail supply remains tight and the Suburban submarket is expected to contribute the bulk of the supply.
  • Vacancy rates in the Prime submarket fell q-o-q, displaying robust occupier demand for retail and F&B spaces, fuelled by rejuvenation efforts in the submarket and growth in tourist arrivals that have boosted retailer confidence. Vacancy rates in the Secondary and Suburban submarkets extended their decline for the fifth straight quarter, despite several business consolidations. 

Rents continue to grow across all submarkets in 2Q23

  • Rents of prime floor space continued to rise q-o-q across all submarkets in 2Q23, for the seventh straight quarter. While the relatively firm demand continued to underpin rent growth amid space tightness, the weak economic prospects continued to cap the upside. 
  • The sustained growth in tourism, the increased workforce foot traffic and the surge in Meetings, Incentives, Conferences, and Exhibitions activities, continued to underpin rent growth in the Prime and Secondary submarkets. The resilient resident demand, supported by a tight labour market, lifted rents in the Suburban submarket.

Outlook: Firm demand to drive rent growth in 2023

  • While the frail economic outlook could lead to retailers adopting a more cautious approach towards expansion, the resilient domestic consumer market and the sustained recovery of the tourism sector are expected to attract new-to-market businesses and spur opportunistic expansion. This, in turn, should underpin occupier demand for retail space.
  • With positive net space absorption and tight retail supply, vacancy rates are expected to trend lower and, in turn, underpin rent growth in 2023. A positive rent outlook and a scarcity of quality retail assets should keep retail asset prices resilient, despite an elevated interest rate environment.

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

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