APPD Market Report Article


December 1, 2021


SGD 35.2


Retail sales hold firm despite COVID-19-related restrictions

  • In 3Q21, the retail sales index (excluding motor vehicles) in chained-volume terms rose 3.3% y-o-y as consumer spending remained resilient, despite the repeated tightening and easing of COVID-19-related measures. Notwithstanding, retail sales in 3Q21 remained below pre-COVID-19 levels (2019). Tourist arrivals in 3Q21 remained at very low levels due to the ongoing border restrictions.
  • The repeated tightening and easing of COVID-19-related measures created uncertainty and disrupted businesses, causing retailers to remain cautious in 3Q21. However, retailers have been more willing to take on calculated risks and commit to leases if the rent level is attractive and landlord support is assured should the business environment turn challenging, yet again, due to COVID-19.

Vacancy rates continue to fall in 3Q21

  • There were no new additions to retail stock in 3Q21.
  • Landlords continued to focus on containing vacancy rates in malls. In their bid to support occupancy, landlords remained flexible when negotiating lease terms in 3Q21. Overall vacancy rates fell q-o-q in 3Q21 for the second consecutive quarter, as opportunistic businesses with deeper pockets capitalised on the attractive rents and the availability of choice retail locations.

Rents stabilise in 3Q21

  • In 3Q21, rents of prime floor space across the three submarkets stabilised or rose marginally q-o-q, after five or six consecutive quarterly declines, depending on the submarket. Cautious optimism regarding a gradual reopening of the economy in light of the high vaccination rate and the government’s roadmap to an endemic COVID-19, underpinned rents.
  • In 3Q21, the continued expansions of retailers to the Prime submarket supported rents. A pick-up in domestic demand and the expected gradual return of the workforce underpinned rents in the Secondary submarket. Rents in the Suburban submarket inched up very marginally q-o-q in 3Q21, as suburban malls continued to serve local demand with essential services.

Outlook: Rental recovery expected in 2022

  • A high vaccination rate, combined with the government’s roadmap for endemic COVID-19 will continue to support the further lifting of safe-distancing measures and the gradual easing of border restrictions. This will lift retailer and consumer sentiment and, in turn, drive retail sales and business expansion. Thus, vacancy rates are expected to continue to fall.
  • Rents could still succumb in the short-term to intermittent, temporary COVID-19-related measures, before stabilising and growing in 2022 amid falling vacancy rates. Capital values are expected to recover in 2022 as yields are expected to compress on the back of an expected rent recovery in 2022 and investor interest in quality retail assets.

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

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