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Retail Marketbeat Report

13/01/2021

Suburban prime rents this quarter were able to hold at $30.85 psf/mth, whereas Orchard ($33.45 psf/mth) and other City Areas ($20.00 psf/mth) rents fell at 0.8% and 1.2% qoq respectively. Rents for highly sought-after suburban retail spaces were more resilient as work-from-home arrangements redistributed consumer spending from the city to the suburbs.  

Economy Reopening
Singapore GDP growth fell 5.8% yoy in Q3 2020, more than halving the record decline of 13.2% in the previous quarter. While most sectors remained in decline, Manufacturing registered a growth of 10% yoy, a reverse from the preceding quarter’s decline. Total retail sales grew by 41.2% qoq in Q3 2020, as the continued reopening of the economy supported business activity and consumer spending. Nonetheless, retail sales were still down 15.8% in the first 11 months of 2020. Supermarkets & Hypermarkets, Minimarts & Convenience Stores, and Computer & Telecommunications Equipment, were the only sectors that achieved yoy growth.

Spending Shifts as Work-From-Home Experiment Continues
Suburban prime rents this quarter were able to hold at $30.85 psf/mth, whereas Orchard ($33.45 psf/mth) and other City Areas ($20.00 psf/mth) rents fell at 0.8% and 1.2% qoq respectively. Rents for highly sought-after suburban retail spaces were more resilient as work-from-home arrangements redistributed consumer spending from the city to the suburbs. Researchers at ACI (Asia Competitiveness Institute) also found that overall spending in the CBD and the city slipped while the suburbs recorded an 8% increase in spending by phase two of the re-opening as compared to pre-pandemic figures.

While changes announced for phase three of the re-opening is only incremental with an increase in permitted social group sizes and capacity limits for malls and large standalone stores, the relaxation of rules and barring an escalation of the COVID-19 situation in Singapore, bodes well for retail sales in 2021 as consumer demand and retailers' confidence recover.

Recalibration of Retail Business Models
Department store sales saw the largest drop of 43% YTD as of November 2020 as the pandemic accelerated the adoption of e-commerce, further eroding the value proposition of department stores. Indeed, the 162-year-old Singapore-based Robinsons announced the closure of its last two stores at Heeren and Raffles City Shopping Centre in Q4 2020. Nonetheless, department stores which have emphasised on place-making and carved a distinct offering that is difficult to replicate digitally, continued to remain relevant and expand. Meidi-Ya, for instance, attracted crowds during the soft opening of its largest 24,000 sf store at Millenia Walk. The store hosts a café and bar, bakery, food hall and supermarket that offers fresh produces air-flown from Japan thrice a week. Department stores such as Isetan and Marks & Spencer are recalibrating their business models and have started selling their products on online shopping site Lazada for the very first time in Q4 2020. Some retailers are exploring new retail concepts. Ikea will open an interior design studio at Jurong Point in early 2021 to offer renovation services for HDB homeowners, on top of its plan to set up its first small-store concept in Southeast Asia at Jem.

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