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In Q1 2021, prime retail rents in Singapore have dipped to $26.60 per sq ft per month but are likely to stabilise in the next six months. Source: CapitaLand
Island-wide prime retail rents declined 12.9% year-on-year to average $26.60 per sq ft per month (psf pm) during the first quarter of 2021, as the hike in retail activity remained uneven due to the continued implementation of restrictive dining capacity limits, according to a Knight Frank report.
Overall, the drop in average gross rents for prime retail space generally slowed, except for prime retail shops in Orchard, mainly due to the continued lack of tourists.
Singapore registered a total sales, excluding motor vehicles, of $2.8 billion in February 2021, causing the retail sales index (RSI) to increase 8.2% year-on-year to 87.5. The uptick reverses the 8.5% decline posted in January.
While the proportion of online sales, excluding motor vehicles, has normalised from its peak levels of 16.3% and 13.4% in November and September 2020 to 12.0% and 11.7% in January and February this year, respectively – the figures remained higher compared with the proportion of online sales before the roll-out of the circuit breaker in April 2020.
From January to March last year, the proportion of online sales ranged between 6.3% and 10.5%.
With workplace capacity increased to 75%, Knight Frank expects footfall at retail stores to rise, especially those located within the Central Business District (CBD).
“The return of many workers to the workplace should provide for an improvement in retail sales albeit at a moderate pace, as a majority of firms continue to implement flexible work arrangements,” it said.
Knight Frank expects prime retail rents to bottom out before stabilising in the next six months after dropping by around 5% this year.
It noted that malls within the city fringe and suburban areas are already bottoming out and are anticipated to show signs of recovery over the coming months.
“With economic recovery on the horizon, the retail sector has to move forward and evolve to adapt to the changing dynamics in consumer lifestyles and behaviours. The pandemic showed that e-commerce and traditional brick-and-mortar stores need not be opposing or competing forces, but could instead complement each another in a symbiotic fashion,” it said.
“Malls should not only focus on providing a multi-dimensional immersive experience for a consumer through technology, but also consider placemaking strategies to pull shoppers into the malls by providing them with what they cannot access online.”
To achieve these aims, Knight Frank advises landlords to provide certain concessions or incentives to like-minded retailers whose objectives are aligned and offer hybrid rent structures, comprising reasonable base rent and a turnover rent component.
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Cheryl Chiew, Digital Content Specialist at PropertyGuru, edited this story. To contact her about this story, email: cheryl@propertyguru.com.sg
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