Two Tiered Retail Market 2Q2024 Central Region Rents Staying Flat
2Q2024 sentiment in the Central Region retail segment remains positive
2Q2024 data from URA has revealed that retail space rents in Singapore’s Central Region have stayed consistent, following a decrease of 0.4% in the previous quarter.
Tricia Song, Head of Research for Southeast Asia at CBRE, notes that the retail market remains divided into two tiers in 2Q2024, with secondary locations experiencing weaker leasing demand while prime spaces continue to see strong demand.
On an islandwide level, prime floor rents have increased by 1.1% q-o-q, which is in line with the 1.0% q-o-q increase seen in the previous quarter. Retailers are optimistic about an upcoming recovery in tourism and consumer spending following the distribution of Community Development Council (CDC) vouchers, according to CBRE.
The rebound in tourism has also contributed to the increase in prime retail rents, according to Wong Xian Yang, Head of Research for Southeast Asia at Cushman & Wakefield (C&W). With the implementation of the Singapore-China mutual visa-free scheme, visitor arrivals from China have overtaken those from other countries in the first half of 2024. Wong further adds that arrivals from other top source markets like Indonesia and India are also expected to increase as they were below pre-pandemic levels during the same period.
The CBRE report states that all submarkets have recorded positive net absorption in 2Q2024, except for Orchard Road which has seen no change. The Outside Central Region (OCR) and Rest of Central Region (RCR) have particularly outperformed, registering a positive net absorption of 237,000 sq ft and 65,000 sq ft respectively. Song attributes this growth to the completion of new retail spaces in Pasir Ris Mall and New Bahru during this period.
The vacancy rate for retail spaces in Singapore has stabilised at 6.6% in 2Q2024, with a 420,000 sq ft increase in total supply. JLL’s Angelia Phua notes that this is due to resilient demand from occupiers and moderating supply. Meanwhile, vacancy rates in the Central Region remain steady at 7.7%, while vacancy rates in the Rest of Central Area have reduced by 0.7 percentage points to 8.8%, compared to 1Q2024.
Notably, the vacancy rate for Orchard Road has increased from 6.6% in the previous quarter to 6.7% in 2Q2024 due to a slight increase in new supply, with no changes to net absorption. Phua says that with moderated supply and strong occupier demand, Orchard Road is likely to see lower vacancy rates in the second half of 2024. JLL predicts an increase in prime floor rents by 1.5% to 2.5% y-o-y in 2024.
Moving forward, Wong notes that only 9% of the new retail supply between 2H2024 and 2028 is expected to come from Orchard Road. The retail component of the renovated Grand Hyatt Hotel Singapore and the redevelopment of The Cathay are both expected to be completed in 2024, while the redevelopment of Faber House into a hotel and retail space is expected in 2026.
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