Retail sector gets a workout as fitness and wellness growth becomes a key retail trend, and tourism rebound continues to be a boon
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  • The tourism recovery continues to buoy the retail sector and economy more broadly.
  • The impact of reduced retail space demand was softened by a dip in supply.
  • Orchard Road retail rents forecast to grow by 3% to 5%.

A post-Covid recovery has helped to buoy the retail sector, with retail rents at iconic destinations such as Orchard Road standing to benefit from strong tourist arrivals this year.

Among the upcoming trends for Singapore’s retail sector this year, according to Savills, include continuing tourism recovery, a changing fitness and wellness industry, and a subdued level of growth – owing to inflation, interest rates, and other economic factors.

Tourism helps economy to lift off

Citing advance estimates from Singapore’s Ministry of Trade and Industry, Savills Research noted that the Singaporean economy grew 0.7% year-on-year (YoY) in Q3 2023. This represented a slight improvement on the previous quarter’s 0.5%.

“The recovery in the tourism sector had been strong enough to lift the economy.”

Savills Research

Visitors to Singapore rose to nearly 3.9 million in Q3, which compares to the quarterly average of 4.5 million from 2015 to 2019.

Retail sales growth was led by higher demand for food and beverage, along with cosmetics, toiletries and medical goods. It was posited in the Savills report that sales could be being driven by duty-free shops, particularly given the continuing recovery being seen in the tourism sector.

Supply dip softens blow from negative net demand

Retail vacancy rates across Singapore eased 0.3 percentage points (ppt) quarter on quarter (QoQ) to 7.2% in Q3 2023.

While net demand for retail space turned negative, to -86,000 sqft, in Q3, the removal of 248,000 sqft of retail space reduced the impact of the negative net demand.

Downtown Core Planning Area vacancy rates notably fell to the lowest level since the final quarter of 2019, down 2.5 ppts QoQ to 7.9% in Q3 2023.

New gyms open while others consolidate

The health and wellness industry continues to grow and evolve, according to Savills, with new brands entering the market.

Of note, however, are new openings at a smaller scale. Examples included Trapeze Rec. Club Tanjong Pagar at 8,000 sqft, and Freedom Gym at 6,000 sqft.

The luxury retail brand Hermès also started its HermèsFit pop-up gym earlier this year on Orchard Road.

Other gym operators have taken a more suburban approach, benefiting from substantially lower rents and changing client needs – particularly with continued work-from-home considerations.

While some health and wellness centres see growth or a change in scenery, others have closed.

“… there was also some consolidation among the bigger fitness chains (around 30,000 sqft), especially in central areas amid hybrid working arrangements,” noted the Savills report.

“For instance, Pure Group shuttered two branches at Suntec City due to insufficient members.

“In order to manage their costs and improve their revenue streams, businesses will start to right-size their operations or diversify their businesses.”

Over 2 million sqft to come online over the next four years.

Savills estimates around 2.3 million sqft of new retail space to come to market from 2024 to 2027.

The new supply estimate averages out to an annual supply of 578,000 sqft, about half of the pre-pandemic (2015-2019) five-year annual average of 1.1 million sqft.

Projects set to be completed this year include Pasir Ris Mall and the retail component of the revamped Grand Hyatt Hotel.

Retail forecast for 2024

Savills Research’s retail rental forecast for Orchard Road is a three per cent to five per cent rise in rents, with suburban areas to remain flat.

The report highlighted the completion of several retail projects, such as Marina Square, Forum Mall, and Harbourfront Centre, to help lift overall rental expectations in Central Region.

“Retail rents on Orchard Road stand to benefit most from the strong tourist arrivals expected in 2024,” said executive director, research & consultancy, Savills Singapore, Alan Cheong.

On the other hand, suburban retail is expected to be flat, owing to outbound travel and inflation dampening consumption.




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