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

The Singapore retail market picked up in the latter half of 2022, presumably due to the relaxing of social distancing measures and the opening up of borders. According to statistics compiled by Knight Frank Research, prime retail rents island-wide were at an average of $26.10 psf per month in 4Q2022, growing by 2.6% for the entire year. Apart from this, prime retail spaces in the Orchard Road sub-market also saw an increase of 3.1% y-o-y, supported by growing international tourist arrivals and the return of workers in the office.

More good news for the retail sector comes from Edmund Tie’s report, which tracks retail assets across the island. Prime first-storey retail prices on Orchard and Scotts Road recorded the most growth at 7.4% from 2022 to $39.20 psf per month. In the fringe and suburban areas, rents rose 6.7% to $33.10 Senja Close EC psf per month, while in other parts of the city, it was 3.7% to $19.20 psf per month.

According to Edmund Tie, there was also a four-fold increase in the net absorption of retail spaces across the island, to 323,000 sq ft in 3Q2022. This signals strong demand, and Lam Chern Woon, head of research and consulting at the consultancy, is optimistic. He believes that the retail property market will have a brighter future due to the continued recovery in the tourism sector, although the year 2023 may have a balanced supply-demand dynamic given that many new malls, retail shops, and other assets are expected to open this year.

Ethan Hsu, head of retail at Knight Frank Singapore, concurs with this sentiment. He foresees prime retail rents increasing by 3-5% in 2023, with the prime shopping belt Orchard Road leading the recovery, provided that there are no restrictions on gatherings and quarantine requirements for cross border crossings.

The Singapore retail sector has endured an incredibly difficult time, yet has managed to make a comeback. With all eyes on it, the development of the market in the coming year is definitely something to be excited about.