Risks Loom Despite China’s Reopening
Singapore total retail sales dropped by 8.2% m-o-m in Jan 2023, as consumer spending slows post holiday season and the “front-loading” of purchases due to GST hike eases. Essential trades such as supermarkets and food & beverage services would see firmer sales performance given the muted economic climate and potential cost-of-living impact. While China’s reopening could offer a boost to retail sales through the influx of Chinese tourists, this may be more apparent in Q2 2023 onwards when more international flights resumes.
Rents Witness Further Recovery
Islandwide prime retail rents continued to trend up by 0.6% q-o-q in Q1 2023, a sixth straight quarter of growth, on the back of rising shopper traffic and tenant sales. Demand for well-located retail spaces has picked up as prime malls were reported to register improved committed occupancy of 98% to 100% as of 31 Dec 2022, driven by larger and well-located malls, based on business updates of major S-Reits.
Suburban prime retail rents increased by 0.4% q-o-q in Q1 2023 as demand persists with steady domestic catchments and perpetual day-to-day shopping. Orchard and Other City Areas prime retail rents grew by 0.7% and 0.6% q-o-q in Q1 2023, albeit they remain below pre-Covid rates. Higher tourist arrivals and a stronger return to office momentum have increased retailer confidence for city centre retail spaces. Orchard prime retail rents could lead growth in 2023, underpinned by a strong tourism recovery and limited new prime retail supply in the pipeline. Singapore international visitor arrivals are expected to double to at least 12 million visitors in 2023 from about 6.3 million visitors last year.
Food & Beverage Players to Spice Up the Market
Food & Beverage (F&B) establishments remains the key retail demand driver, underpinned by a secular trend of dining out in Singapore. While some retailers are recalibrating their store footprint given continued operating challenges, larger F&B operators whom have deeper pockets or new- to-market brands could accelerate their expansion strategy and backfill vacant store space amidst an expected influx of Chinese tourists and improving tourist arrivals. Amongst new-to-market F&B brands that have entered Singapore in Q1 2023 are American baked goods chain Cinnamon which has opened at Raffles City and Japanese one-star Michelin ramen restaurant Nakiryu which debuted at Plaza Singapura. The coffeehouse scene in Singapore is also bustling with Chinese Luckin Coffee’s plans to open several outlets here by end-April, Australian Gloria Jean’s opening of its fourth outlet recently at Republic Plaza after re-entering the local market during Covid, Canadian Tim Hortons’s debut towards end-2023 and Indonesian Kopi Kenangan’s cited plans for Singapore expansion. Another highly anticipated store opening would be global donut chain Mister Doughnut’s first permanent outlet at Junction 8 in May 2023, following its launch of a pop-up last year.
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