The Outside Central Region (OCR) faced a challenging first quarter in 2024, with a net decline in retail space occupancy totaling approximately 54,000 square feet. The vacancy rate in the OCR rose to 4.4% in 1Q2024, up from 3.9% in the previous quarter. According to CBRE, this increase is attributed to consolidation in specific sectors and resistance to rising rental costs.
Conversely, the Orchard area experienced the highest demand for retail space during the quarter, accounting for 43,000 square feet, or 80%, of the total take-up in the Central Area. Retailers in Orchard were motivated to expand due to a significant surge in tourist arrivals, which jumped by 49.6% year-on-year in 1Q2024, fueled by a five-fold increase in Chinese visitors, as noted by Tricia Song, CBRE’s head of research for Singapore and Southeast Asia.
Despite these challenges, local consumer spending remained robust, with shopper traffic surpassing pre-COVID levels. Retailers continued to secure prime retail spaces in the OCR, as highlighted by Wong Xian Yang, Cushman & Wakefield’s head of research for Singapore and Southeast Asia. For instance, Chinese sportswear brand Beneunder opened a store in Westgate Mall in Jurong East in 2023, and Hong Kong cosmetics chain Sa resumed operations at Jurong Point last quarter, with plans to open three more outlets in the OCR in 2Q2024.
Retail space rents in the Central Area experienced a slight decline, falling by 0.4% quarter-on-quarter, extending a 0.1% drop from the previous quarter. However, islandwide prime retail rents increased by 1% quarter-on-quarter, following a 1.2% rise in the previous quarter.
Amid these shifts, some retailers have exited the market. Fashion brand Zara closed its outlet at Marina Square, Times Bookstores shuttered locations at Plaza Singapura and Waterway Point, and South Korean convenience store Emart24 withdrew from Singapore, closing all three of its outlets in March. Tom & Stefanie, a children’s fashion retailer, also closed its store at West Mall after 25 years.
Retail rents in the Central Area saw a slight increase of 0.2% quarter-on-quarter, primarily driven by the Orchard area, according to Wong Xian Yang. In contrast, retail rents in Fringe Locations declined by 1.8% quarter-on-quarter in 1Q2024.
Looking ahead, the pipeline of business travel, meetings, incentive travel, conventions, and exhibitions (BTMICE), along with enhanced air travel connectivity and capacity, particularly with the upcoming Changi Terminal 5, is expected to further boost the tourism recovery and, consequently, the retail sector, as noted by JLL’s Angelia Phua.
Phua, JLL Singapore’s consulting director for research & consultancy, also pointed out that rising operational costs, intense competition, unappealing retail strategies, and shifting consumer preferences have contributed to store closures and increased vacancy rates.
“The retail market remains bifurcated,” says Tricia Song, highlighting that secondary locations continue to see weaker demand compared to prime areas.
In terms of retail property investments, URA’s 1Q2024 data showed a 1.8% quarter-on-quarter increase in retail property prices, marking the fourth consecutive quarterly rise. Phua attributes this trend to investors allocating more capital to high-quality retail assets, drawn by favorable supply-demand dynamics, attractive yield spreads over financing costs and the scarcity value of such properties.
In the Orchard area, notable openings included Swarovski’s largest store in Singapore, a 2,300-square-foot outlet at Wisma Atria, and homegrown womenswear brand Klarra’s 1,500 square-foot flagship store at ION Orchard. With rising retail demand, malls such as Paragon and Wisma Atria achieved full occupancy by the end of 2023, Wong added.
Vacancy rates in the Orchard area dropped to 6.4% in 1Q2024, down from 8.7% in 4Q2023, marking the lowest level since the onset of the pandemic.