Threats to Retail Sales still Loom amid Economic Growth
An economic turnaround of 1.3% was registered in Q1 2021 and Singapore is on track to achieve a 4 to 6% GDP growth in 2021. The retail market had also been expected to recover with retail sales growing 7.6% for the first five months of 2021. Sales for all segments, however, remained below pre-pandemic levels, except for Supermarkets & Hypermarkets, Furniture & Household Equipment, Recreational Goods and Computer & Telecommunications Equipment. Although retail sales is likely to account for a full-year expansion in 2021, due to the low base last year, safe management measures under Phase 2 (Heightened Alert) are expected to hamper the pace of recovery. Amidst a fall in the community infection cases, Singapore has gradually eased the safe management measures since 14th June to support a further resumption of activities.
Rents Fell Collectively in the Wake of Tightened Pandemic Measures
Islandwide retail rents fell 1.8% qoq in Q2 2021, mainly due to the steeper rental dips of 3.1% qoq and 2.0% qoq in other city areas and Orchard respectively, where the default WFH regulations made the greatest impact on footfall. While suburban rents fell moderately by 0.8% qoq, with the dine-in ban in Phase 2 Heightened Alert and occupancy limits. Overall suburban vacancy rates remain very healthy, at 6.7% in Q1 2021, the lowest since Q2 2016. On the other hand, vacancy rates in other city areas and Orchard are notably higher, at 11.4% and 11.6% respectively in Q1 2021. Amidst challenging business conditions, there have been a spate of store closures within these two submarkets. For example, lifestyle retailer, Muji closed its Marina Square outlet and US fashion brand, Abercrombie & Fitch closed its only outlet in Singapore. Amid border restrictions and ongoing safe management measures, a further drop in retail rents is projected for 2021. Nonetheless, prime retail rents will be supported by a limited new retail supply and strong demand for prime spaces in top tier malls.
Big Brands Continue to Expand
Despite the challenging retail landscape, F&B chains and prominent international brands continued to expand in Q2 2021. Vietnamese cafe chain, So Pho opened its 17th outlet at The Shoppes at Marina Bay Sands, hotpot chain Haidilao announced its 14th outlet at City Square Mall, and fast casual restaurant chain, Shake Shack is opening its 7th outlet at Gardens by the Bay. While British activewear retailer, Sweaty Betty, and French fragrance brand, Maison21G Paris, launched their first Singapore outlet in ION Orchard and The Shoppes at Marina Bay Sands respectively. Other overseas brands that debuted on the city-state’s retail scene in Q2 2021 include San Francisco bakery café, Mr Holmes Bakehouse and Taiwanese bubble tea chain, AtTea. In anticipation of a further relaxation of safe management curbs in H2 2021 and leisure travel to resume amid a high vaccination rate, more new entrants and established brands are expected to demand for quality retail spaces here, using the country as a springboard to tap into neighbouring consumer markets. This bodes well for the retail scene in Singapore as new-to-market brands and interesting concepts would rejuvenate the retail landscape.