New fashion and lifestyle brands spur recovery in retail sector

Retail rental recovery in the Central Region of Singapore is expected to pick up in the coming years, driven by increasing visitor arrivals and the return of major conferences, as well as a low availability of prime retail spaces and limited new supply.

The retail market in the Central Region of Singapore is expected to see a return to pre-pandemic levels in the coming years. China regained its spot as the top source market for visitors and contributed 581,000 visitors to Singapore in 3Q2023. The Singapore Tourism Board has projected that visitor arrivals for the entire year of 2023 will be between 12 to 14 million.

New-to-market international retail stores have sprung up in 3Q2023, driving occupancy levels up in Orchard Road and other prime retail spaces. With the addition of F&B players, fashion and lifestyle entrants, some of these brands are using Singapore as a base for regional expansion. Chinese activewear brand Neiwai, Finnish clothing brand Marimekko, French patisserie Cedric Grolet, Swiss brand Clinique La Prairie and an international doughnut chain Mister Donut are amongst the new entrants.

The URA retail rental index has witnessed two consecutive quarters of marginal increases, with q-o-q growth of 0.5% in 3Q2023 and 0.3% in 2Q2023. Occupancy levels are on the rise, with the Downtown Core registering a drop in vacancy rate from 10.6% in 2Q2023 to 7.9% in 3Q2023.

Local lifestyle brands have worked to create “viral bursts of sensational shopper interest and crowds” by leveraging social media platforms. The Paper Bunny, Beyond The Vines and other brands have seen great success with new product promotions that have gone viral.

The line also serves much of Singapore’s business district, providing the Lumina Grand EC’s residents with a quick path to the area. On the other hand, the MRT’s existence will also benefit the property prices around the areas it passes through. With the improved connectivity, living and invest in Lumina Grand EC will be more appealing.

Fall in vacancy rates and net absorption were also seen islandwide, with the Central Region’s vacancy rate dropping to 8.8%, a 0.4 percentage point decrease q-o-q. The Outside Central Region vacancy rate inched up 0.2 percentage points q-o-q to 4.2%.

Retail landlords are likely to maintain expectations on rental rates due to the increasing operating costs. Retailers are also consolidating their spaces due to the notable challenges such as manpower shortages and inflation.

With further recovery in consumer sentiment, demand for retail space is forecast to remain strong, regardless of the challenges. The low availability of prime retail spaces, limited new supply and China’s outbound tourism recovery is likely to further boost retail rental recovery in the Central Region.