Prime retail rents to see further recovery in 2023, with Orchard Road leading the way

In its 4Q2022 market report, Knight Frank mentions that prime retail rooms in the Orchard Road location led the way in regards to rental growth, charting a boost of 3.1% y-o-y in 4Q2022 to $29.10 psf per month, followed by prime retail space in the Marina Centre, City Hall together with Bugis sub-market which registered a development of 2.6% y-o-y to $23.90 psf each month. The surge in rents was supported by a boost in foreign visitors landings, as well as the return of workers came back to the office.

The improvement of the Singapore retail market obtained momentum in the last part of last year, regards to social distancing measures being calmed and boundaries restarting. “The retail industry endured and has indeed survived an extremely hard time of unparalleled challenge, just starting to acquire grip from the clearing of actions from 2Q2022 onwards,” remarks Ethan Hsu, Knight Frank Singapore’s head of retail industry.

Lam Chern Woon, head of research and consulting at Edmund Tie, expects a more vibrant year forward for the retail property market, helped by the continued healing in the tourism market. “With the majority of the supply pipe slated to find onstream in 2023, consisting of The Woodleigh Mall, and even retail outlets at One Holland Village, Guoco Midtown as well as IOI Central, the supply-demand dynamics are expected to be stabilized this year,” he adds.

Knight Frank’s Hsu is also projecting prime retail rents to proceed growing this year, noting that the retail market is “in a better placement now”, also thinking about the boost in the Goods and Services Tax (GST) and also a better low-key economic outlook. “As long as there are no dimension limits to events and quarantine responsibilities for cross boundary arrivings, prime leas of retail space are most likely to grow in between 3% and also 5% for the whole of 2023, with the prime purchasing belt Orchard Road leading the recovery,” he anticipates.

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A separate report by Edmund Tie Research also feature records further indicating the conditioning of demand for retail rooms in the Orchard location. Based on retail properties tracked by the consultancy, prime first-storey retail location on Orchard and Scotts Road viewed the best rental development of 7.4% for the whole of 2022 to $39.20 psf monthly. In the edge together with suburbs, rentals expanded by 6.7% in 2022 to $33.10 psf monthly, while in some other city locations, it expanded by 3.7% to $19.20 psf monthly, based on Edmund Tie’s files.

According to data assembled by Knight Frank Research, prime retail rentals island-wide climbed up 1.7% q-o-q in 4Q2022 to hit around $26.10 psf monthly. This carries full-year prime retail rental development to 2.6% for 2022.

Edmund Tie’s report even explains that in 3Q2022, islandwide final absorption for retail places appeared at 323,000 sq ft, a four-fold surge from the 86,000 sq ft signed up the preceding quarter, signalling enhancing demand.

The consultancy is anticipating prime first-storey retail leas in Orchard and Scotts Road to preserve its growth of between 7% and 9% in 2023, while rentals in different retail sub-markets are anticipated to develop in between 3% and also 6%.