APPD Market Report Article


November 28, 2022

Angelia Phua, Director - Research, Singapore


SGD 35.9


Domestic and tourism consumption remains resilient

  • The government continued to relax domestic COVID-19 measures and travel restrictions in August 2022, following extensive easing in April 2022, as the nation transitions towards endemic COVID-19. This further drove domestic consumption and tourism spending as visitor arrival numbers grew, which in turn further underpinned the retail market recovery.
  • Retail sales eased off on dissipating pent-up demand but remained relatively resilient, notwithstanding inflationary pressure. In 3Q22, the retail sales index (excluding motor vehicles) in chained-volume terms rose 14.1% y-o-y, compared to 16.6% y-o-y in 2Q22. Visitor arrivals grew q-o-q in September 2022 for the eighth consecutive month.

Vacancy rates extend their decline across all submarkets in 3Q22

  • Retail stock fell marginally in 3Q22 due to the closure of Bedok Point in the quarter, paving the way for a mixed-use development, Sky Eden@Bedok. The supply pipeline remained tight, with no new retail space openings in 3Q22. The bulk of the new retail space will continue to come from the Suburban submarket.
  • The reopening of Singapore’s economy has boosted retailer confidence, spurring strategic business expansion. On the back of firm occupier demand and lack of new supply, vacancy rates in the Prime submarket fell q-o-q in 3Q22 for the seventh consecutive quarter, while those of the Secondary and Suburban submarkets declined for the second consecutive quarter.

Rent growth gathers pace in 3Q22 across the three submarkets

  • Rent growth of prime floor space accelerated across all submarkets in 3Q22, in response to falling vacancy rates and improved retailer confidence.
  • The growth in tourist arrivals, the return of the workforce to their workplaces, and the recovery in MICE activities have lifted consumption and, hence, supported rents in the Prime and Secondary submarkets. Rents of prime floor space in the Suburban submarket rose for the fifth straight quarter as resident demand remained relatively healthy and positive business sentiment supported rents.

Outlook: Retail rents to remain on a growth path

  • Singapore’s commitment towards a sustained economic reopening should continue to drive domestic and tourism consumption, keep business confidence positive and spur business expansion. Inflationary and recessionary headwinds, however, could lead to retailers adopting greater caution in their expansion strategy.
  • Vacancy rates should continue to fall on the back of positive net space absorption and tight supply, in turn supporting q-o-q rent growth in 4Q22 and y-o-y in 2023. A positive rent outlook and a scarcity of quality retail assets should underpin retail asset prices, notwithstanding an expansionary yield outlook.

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

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