New fashion and lifestyle brands spur recovery in retail sector

Amid a strong recovery of the retail market in the 3rd quarter of 2023, international new-to-market retailers have emerged, mostly in the F&B sector, bolstering occupancy in prime retail space in Orchard Road and other Central Region areas. Chinese activewear brand Neiwai opened its first store in Southeast Asia in Singapore’s Raffles City in July and Finnish clothing brand Marimekko debuted in Ion Orchard in September with plans to expand to Malaysia and Vietnam. French Patisserie Cedric Grolet also made its Asian debut in Como Orchard that same month. Meanwhile, Swiss brand Clinique La Prairie opened its first holistic health boutique in Singapore and Southeast Asia at Marina Bay Sands Hotel Tower 3 in July with its business partner RichL Group, a Singapore-based investment company in luxury brands.

Notable F&B entrants also include international doughnut chain Mister Donut, who opened its first store at Junction 8, Australia-based beverage brand Chaffic at Westgate, Taiwan’s Frozen Heart chain at Jewel Changi, and Philippines-based avocado dessert chain Avocadoria who set up their first international franchise at Ang Mo Kio Hub. Local lifestyle brands have leveraged social media’s viral capabilities to create “viral bursts of sensational shopper interest and crowds”, says Leonard Tay, Knight Frank Singapore head of research. This has been reflected with the success of The Paper Bunny and Beyond The Vines’ marketing campaigns.

The URA retail rental index reflected the positive sentiment of the retail market, with marginal increases of 0.5% q-o-q in the 3rd quarter and 0.3% q-o-q in the second. The Downtown Core recorded net demand of 118,403 sq ft while the vacancy rate dropped from 10.6% to 7.9%. Islandwide retail vacancy rates fell 0.3 percentage points to 7.2% and in the Central Region 0.4 percentage points to 8.8%.

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Rental recovery is expected to pick up going forward, due to low availability of prime retail spaces, limited new supply and China’s outbound tourism recovery. Angeline Phua, JLL consulting director of research and consultancy, states this is demonstrated by the growing pre-commitment rates of upcoming retail developments, such as One Holland Village and Pasir Ris Mall. Demand for retail space has however been “challenging” due to higher labour costs and intense competition for consumers.

read also: Retail rents end five consecutive quarters of declines with 0.3% q-o-q growth in 2Q2023

China regained its spot as the top source market for visitor arrivals in 3Q2023, contributing about 581,000 visitors to Singapore, though 44% lower than the pre-pandemic level in 3Q2019. Singapore visitor arrivals, estimated to reach 12 to 14 million by the end of the year, have been largely spurred by growing traveller confidence and increasing flight connectivity and capacity, and should support rent growth. The return of major meetings, incentives, conferences and exhibitions (MICE) events is also dawning a wave of strategic business expansion.

Retail landlords are expected to hold on to their rental expectations, despite higher operating costs and some retailers facing difficult times. However, the resilient consumption demand in Singapore will continue to attract new retailers and backfill vacant space.