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With the disruption from Covid-19 pandemic, retail sales is expected to drop by around 7% this year as both tourist and domestic spending declined.
Cushman & Wakefield noted that the drop could be more pronounced than during the SARS and Global Financial Crisis, when retail sales fell 3% and 2.7%, respectively.
In Singapore, tourist spending make up around one-fifth of the total retail sales and the extended travel bans on all short-term travel “do not bode well for the brick and mortar retail businesses”. The circuit breaker measures are also projected to further exacerbate the pain in retail.
Nonetheless, prime retail rents have been relatively resilient in the first quarter of 2020 as Covid-19’s full impact has not yet fully materialised.
In Q1 2020, prime rents at Orchard Road fell 1.4% to $35.27 per sq ft per month (psf pm), while rents at Other City Areas dropped 0.6% to $21.63 psf pm.
Prime retail rents at suburban malls, on the other hand, inched up by 0.3% to $31.85 psf pm, as such malls remained open for most trades until end-March.
“Suburban malls are generally more defensive and resilient in nature due to their dominance in the heartlands, and upcoming supply in the suburban locations is fairly tight. In fact, during the GFC, while Orchard prime rents dropped by 15% from peak to trough, suburban prime rents rose by 1% during the same period,” revealed Cushman & Wakefield.
Retail leasing activity in Q1 2020 include the 26,000 sq ft expansion of Don Don Donki at JEM, Grab Kitchen’s take up of 6,000 sq ft space at 63 Hillview Avenue and the expansion of Shake Shack at 89 Neil Road.
Considering that the disruption brought about by Covid-19 is severe, Cushman & Wakefield believes that prime retail rents will fall across the board this year. It expects Orchard Road to be the most hit, with rents falling by around 10%.
“With circuit breaker measures in place, Other City Areas rents including malls in Marina Centre, Newton, Harbourfront will also be impacted as most of the workforce works from home,” it said.
However, suburban malls will show some resilience as consumers carry on with necessity shopping although at a lesser frequency.
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Victor Kang, Digital Content Specialist at PropertyGuru, edited this story. To contact him about this or other stories, email victorkang@propertyguru.com.sg