The Singapore economy contracted by 13.2% yoy in Q2 2020, marking the steepest drop in GDP historically. The plunge in GDP growth was due to the circuit breaker measures implemented, which saw the temporary closure of non-essential businesses. Against this backdrop, retail sales plunged by -35.3% qoq in Q2 2020, as consumers stayed at home and went online for their shopping needs. For the whole of 2020, the Ministry of Trade & Industry expects the GDP growth to fall by -7.0% to -5.0%, the largest economic contraction since Singapore’s independence in 1965.
E-retailers and Athleisure to Grow
The Covid-19 pandemic has driven the prominence of online shopping and led to companies adopting or exploring flexible work arrangements. As such, we see e-retailers and athleisure brands to be significant in driving future retail demand. Some e-retailers which have thrived due to the rise in e-commerce, may pursue a “clicks to bricks” strategy and take advantage of declining rents to open a physical store to gain more sales and brand recognition. For example, online fashion retailer, Love, Bonito opened her fourth store at Vivocity, occupying 4,300 sf. The athleisure trend is booming driven by broad shifts in the clothes people are wearing due to flexible work arrangements and a greater focus on healthy and active living. Sportswear and Footwear retailer, Footlocker, has continued to expand, and opened her sixth and largest store yet at Orchard Gateway @ Emerald, spanning 23,000 sf.
Market Conditions Remain Challenging
Amidst weak economic conditions, prime retail rents fell across the board. Other City Areas ($20.25 psf/mo) and Orchard ($33.73 psf/mo) rents fell the most at 3.0% and 2.9% qoq respectively in Q3 2020, amidst the implementation of flexible working arrangements and on-going travel restrictions. Supported by nearby residential catchments, suburban ($30.85 psf/mo) prime rents were relatively more resilient and fell only 2.2% qoq. Nonetheless, the spate of closures across the island will continue to put pressure on rent levels. For example, British fashion brands Topshop and Topman have closed their last Singapore outlet, and shifted their business online. The retail operating conditions remain challenging, but first-tier malls have been able to hold on to their rental levels due to their high occupancy levels and ability to attract new tenants. On the other hand, weaker malls remain in distress.