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Despite being one of the most severely affected sectors by the COVID-19 pandemic, Colliers International believes the long-term prospects of Singapore’s retail sector remains promising.
According to the Singapore Department of Statistics, total retail sales in Singapore fell 40.5% year-on-year to $2.1 billion in April. Of this, 17.8% were conducted online – which is way higher than the usual proportion of around 6%.
This comes as around 80% of retail businesses temporarily ceased operations due to the circuit breaker measures. Tourism visitation, which makes up around 13% of Singapore’s retail sales, also came to a complete halt, while growing job losses and economic uncertainty further exacerbated the decline in retail spending.
In fact, experts expect the retail sector to register a similarly poor sales performance in May and that it may take a while before the sector can recover from the outbreak.
Despite this, Colliers still see a promising outlook for the retail sector and offered five reasons on why its long-term prospects remain attractive.
First, Singapore’s three pillars of economy – government, households and businesses – all have a very strong balance sheet.
“The Singapore government is in a strong financial situation where its past reserves and large infrastructure programmes can be leveraged to stimulate the economy. Businesses are globally competitive, well-capitalised, and have the financial means to cruise through turbulent times without massive layoffs. Households have some of the world’s highest per capita income, savings rate and accumulated wealth,” it explained.
Although it may take some time for Singapore’s economy to fully recover, Colliers pointed that the economic conditions “are in place for consumption levels to remain high once all government restrictions are lifted”.
Moreover, retail malls are considered the main commercial and socialisation hubs thanks to the city-state’s high urban density and tropical climate.
Colliers noted that visitors and Singaporeans prefer the convenience and climate-controlled environment of malls versus outdoor commercial locations.
Third, Singapore retail malls, with their small retail spaces and shorter leases compared to their European and US counterparts, are adaptable to the ever-changing trends.
“The fact that Singapore malls are strategically located, serve a large catchment area population and attract high constant footfall provides good conditions for adaptation to new retail trade mix,” said Colliers.
Fourth, the supply of commercial space within the city-state is strictly regulated by the government, which means existing established malls enjoy bigger foot fall and sales figures, making it more sustainable for all parties.
Colliers said the high barrier to entry “makes retail malls very resilient assets in terms of capital values and future appreciation”.
Finally, Singapore benefits from a strong domestic retail market as well as a large and growing tourism market. Singapore received over 19 million visitors in 2019, more than triple its total population and who made up around 13% of total retail sales.
The retail sector’s reliance on both tourism demand and strong domestic market offers stability to malls and their tenants who can adjust their merchandising and offering to cater to one or both of such groups, said Colliers.
It noted that retail malls near residential areas within suburban areas are “well-positioned to benefit from the post-pandemic recovery, as they are less exposed to international tourism spending and have a retail mix that caters to their catchment area consumers”.
As such, investors have been focusing on smaller suburban malls.
It added that well-positioned malls that enjoy good access to transport or MRT links “provide the necessary amenities for the working population”.
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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