RENTS of retail space in Singapore’s central region dipped 0.4 per cent in the first quarter of 2024, extending a decline of 0.1 per cent seen in Q4 2023 as vacancy rates rose for stores outside prime locations.

Falling rents in the fringe areas of the central region dragged on the overall rental index, even though rents in the central area rose 0.2 per cent in Q1. Rents in the fringe areas fell 1.8 per cent, said Wong Xian Yang, Cushman & Wakefield’s head of research for Singapore and South-east Asia.

He said: “Within the central area, Orchard retail market continued to recover with the tourism boost. The iconic shopping belt has been driving brand expansions as retailers position themselves strategically to capture tourists’ footfall and spending.”

Islandwide, the Urban Revelopment Authority’s (URA) retail vacancy rate rose 0.2 percentage point in Q1 to 6.7 per cent, following three quarters of decline. This was led by higher vacancy rates in the Downtown Core, Rest of Central Area and fringe areas in the central region, and at suburban locations in the Outside Central Region, noted JLL’s consulting director of research and consultancy Angelia Phua. 

Vacancy rate for the Orchard planning area was 6.8 per cent, while that of the central area outside Orchard was 8.5 per cent. The figure was 5.9 per cent for the rest of Singapore.  

“Business closures in selected malls from underperforming retailers due to higher operational costs, keen competition, unpopular retail concepts and changing consumer preferences likely drove vacancy rates higher,” said Phua.  

A NEWSLETTER FOR YOU

Tuesday, 12 pm

Property Insights

Get an exclusive analysis of real estate and property news in Singapore and beyond.

Sign Up

In Q1, Spanish fast fashion brand Zara moved out of Marina Square, after earlier closing several stores in other locations including on Orchard Road. Times Bookstores closed its branches at Plaza Singapura and Waterway Point due to declining sales and low foot traffic in stores.

Year-on-year, retail rents in the central region are still up by 0.3 per cent. 

Tricia Song, CBRE’s head of research for Singapore and South-east Asia, said secondary locations are seeing softer demand compared to prime spaces, which continued to witness strong demand in Q1. Islandwide, prime floor rents rose 1 per cent during the quarter, extending the 1.2 per cent rise in Q4 2023.

Retail sales performance was mixed in the first quarter, Song noted. January sales (excluding motor vehicles) fell 3 per cent compared to the year-ago period, while February sales were up 7.9 per cent.

Figures released by URA on Friday (Apr 26) showed that prices of retail space increased by 1.8 per cent, extending a 1.2 per cent increase in Q4. 

In Q1, the amount of occupied retail space rose by 8,000 square metres (sq m) net lettable area (NLA), a smaller increase from the 63,000 sq m NLA increase in Q4. 

Retail stock increased by 19,000 sq m NLA in Q1, compared with an increase of 21,000 sq m in the previous quarter. 

As at end-Q1, there was a total supply of about 610,000 sq m gross floor area (GFA) of retail space in the pipeline, compared with the 621,000 sq m GFA of retail space in the pipeline in Q4. 

Retail rents in the central region are expected to stay on track to recovery amid steady office crowds and increasing tourist arrivals, said Wong. 

Visitor arrivals reached 4.35 million in Q1 and are at about 93 per cent of pre-Covid levels, he said.

Amid a below-historical-average level of supply over the next few years, prime retail rents are expected to continue recovering in 2024, said CBRE’s Song.