Singapore – May 2019 MARKET IN MINUTES Retail Savills Research Savills team Please contact us for further information SINGAPORE Marcus Loo CEO, Singapore +65 6415 3893 [email protected] Sulian Claire Executive Director Retail & Lifestyle +65 6415 3880 [email protected] Retail vacancies climb to record high of 8.7% RESEARCH Activity-based and multi-concept retailers continue to expand their retail Alan Cheong Executive Director footprint. Singapore +65 6415 3641 • On the back of improved hiring levels and Chinese New • Although multi-faceted challenges confront retailers, [email protected] Year festive spending, retail sales (excluding motor vehicles) the relative lack of supply in Orchard Area will keep rents Simon Smith improved 4.9% year-on-year (YoY) in January, but were stable while prime suburban malls should experience Senior Director down 10.9% YoY in February from their sales peak a year ago. slightly better prospects arising from their pull within their Asia Pacifi c respective catchment areas. +852 2842 4573 • Other than Orchard and Fringe Areas, net take-up of retail [email protected] space declined across the board, pushing up the island-wide MCI (P) No. 090/08/2018 Company Reg No. 198703410D vacancy level to a high of 8.7% in Q1/2019. “ The lower tourist spend on Savills plc • In Orchard Area, the limited new supply along the shopping Savills is a leading global real retail and F&B will goad more estate service provider listed on belt held prime monthly rents unchanged at S$29.90 per sq the London Stock Exchange. The company established in 1855, has ft in the fi rst quarter. Core Orchard Road and CBD a rich heritage with unrivalled growth. It is a company that leads rather than follows, and now has malls to convert space to over 600 offi ces and associates • Given the accessibility and ready catchment of shoppers, throughout the Americas, Europe, Asia Pacifi c, Africa and the Middle the prime monthly rent in Suburban Area also stayed fl at at fl exi-users and target local East. This report is for general informative purposes only. It may S$28.80 per sq ft. not be published, reproduced or consumers.” quoted in part or in whole, nor may it be used as a basis for any • Squeezed by shrinking sales and rising costs from varying contract, prospectus, agreement ALAN CHEONG, SAVILLS RESEARCH or other document without prior fronts, retailers are likely to focus on consolidating loss- consent. Whilst every eff ort has been made to ensure its accuracy, making stores while expanding with caution. Savills accepts no liability whatsoever for any direct or consequential loss arising from its use. The content is strictly copyright and reproduction of the whole or part of it in any form is prohibited without written permission from Savills Research. savills.com.sg/research 1 Retail MACROECONOMIC OVERVIEW Given the accessibility and ready catchment of GRAPH 1: Growth In Retail Sales And F&B Sales, According to advance estimates released by shoppers, the prime monthly rent in Suburban January 2014 to March 2019 the Ministry of Trade and Industry (MTI), Area also stayed fl at at S$28.80 per sq ft. Even F&B sales Retail sales (excluding motor vehicles) Singapore’s economic growth came in at 1.2% though prime units in both areas are highly 15% YoY in Q1/2019, easing slightly from 1.3% in sought-after due to still-healthy footfall, Q4/2018. Despite subdued economic growth, retailers’ continued resistance to higher rents 10% the labour market stood fi rm in Q1/2019 has put a cap on rental increases. with higher employment and a steady 5% unemployment rate. JEWEL: THE ATTRACTION FOR The improved hiring levels and Chinese LOCAL AND INTERNATIONAL 0% New Year festive period boosted consumer VISITORS spending in the beginning of the year. The With the opening of a new lifestyle YOY CHANGE YOY -5% increase of 4.9% YoY in retail sales (excluding destination, which is attempting to capture motor vehicles)1 in January was bolstered by both domestic residents and air passenger higher sales on toiletries and apparel. The traffi c, Jewel Changi Airport (Jewel) has -10% record high of over 1.6 million visitor arrivals become the choice for international brands in January also supported the sales recovery. keen to open their largest stores and expand -15% However, compared to the Chinese New Year their retail footprint in Singapore. Brands Jul Jul Jul Jul Jul Jan Jan Jan Jan Jan Jan Oct Oct Oct Oct Oct Apr Apr Apr Apr Apr festive sales peak of a year ago, retail sales in including Nike, Muji, Starbucks, Tokyu Hands 2014 2015 2016 2017 2018 2019 February shrunk by 10.9% YoY. Retail sales and Skechers all launched duplex stores in Source Singapore Department of Statistics, Savills Research & Consultancy experienced another broad-based weakening Jewel. After the grand opening of its global in March, albeit at a slower rate. The weaker fl agship store at Orchard Central last year, performance could be attributed to March’s Uniqlo opened its second-largest branch in Southeast Asia at Jewel before launching GRAPH 2: Vacancy Rates, 2011 to Q1/2019 fi rst YoY decline in tourist arrivals after rising every month for almost four consecutive another new outlet at Paya Lebar Quarter years. (PLQ) mall and expanding its existing outlet Orchard Downtown Core Outside Central Region Following a three-month increase through at VivoCity. Apple, which is opening a new 16% January, food and beverage (F&B) revenue2 store at Marina Bay Sands (MBS), will also 14% fell by 4.0% YoY in February as food caterers set up its new fl agship store at Jewel. and restaurants recorded a decline in receipts 12% from last year’s festive period. The decline FITNESS & EXPERIENCE-DRIVEN in F&B revenue eased to 1.2% YoY in March RETAIL DOMINATES 10% when sales at other eating places such as cafés Some fi tness retailers continue to tap into the 8% picked up from the same period last year. emerging wellness trend to spur growth. UFC Gym, which is planning to expand to 15 gyms 6% RENTAL MARKET STAYS FLAT over the next decade, unveiled its fi rst branch at CityLink Mall in March. Barry’s Bootcamp, 4% Singapore’s retail supply tightened slightly by 22,000 sq ft in Q1/2019. The quarter’s the US workout operator, is setting up its fi rst 2% new supply, which came mainly from the location in Asia in May at the redeveloped revamped retail podium at TripleOne Robinson Tower. True Fitness is also 0% Somerset, was more than off set by an overall undertaking a massive expansion, opening Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q3 Q3 Q3 Q3 Q3 Q3 Q3 Q3 removal of stock. the largest fi tness centre in Singapore which 2011 2012 2013 2014 2015 2016 2017 2018 19 Other than Orchard and Fringe Areas where spans 41,700 sq ft at Millenia Walk. The fi rst Source URA, Savills Research & Consultancy net demand remained the same, net take-up of phase comprises the 23,000-sq ft premise retail space declined across the board, pushing which TripleFit will be vacating by end-May, up the island-wide vacancy level by 0.2 of a and the rest of the expansion will complete GRAPH 3: Prime Retail Rents, 2008 to Q1/2019 percentage point (ppt) quarter-on-quarter by Q3/2019. Pure Group will then take over (QoQ) to a record high of 8.7% in Q1/2019 . True’s current 30,000-sq ft gym centre at Orchard Suburban The softer demand could be attributed to F&B Suntec City, launching its eighth facility later 45 closures as some restaurants and take-away this year or early-2020. stores were battered by retail headwinds. Nightclub chain Marquee Singapore made 40 Earlier this year, F&B brands such as Chili’s , its debut in Asia with a three-storey mega-club, Jpot and Pablo Cheese Tart shuttered all their taking up 24,757 sq ft at The Shoppes in MBS. 35 stores in Singapore. Singapore’s fi rst smart spa, Porcelain Origins, The retail rental recovery in Q4/2018 did introduced a multi-concept spa comprising 30 not extend beyond 2018. The rental index in cafe, retail space and beauty services with Central Region was down by 0.2 of a ppt QoQ added digital technologies at Orchard Paragon. in Q1/2019, ending a short-lived uptick in 25 the preceding quarter. In Orchard Area, the SUPPLY IN THE PIPELINE S$ PER SQ FT PER MONTH PER SQ FT S$ PER limited new supply along the shopping belt Approximately 1.9 million sq ft of retail 20 held prime monthly rents3 unchanged at an space4 is expected to come onstream in 2019, average of S$29.90 per sq ft in the fi rst quarter. equivalent to about 2.9% of the total current 15 supply. Owing to major completions from 1 Retail Sales Index at Constant Prices, Monthly. Updated as Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q3 Q3 Q3 Q3 Q3 Q3 Q3 Q3 Q3 Q3 Q3 at 13 May 2019. projects such as Funan and PLQ mall, 2019’s 2 Food & Beverage Services Index at Constant Prices, 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 19 Monthly, Updated as at 13 May 2019. upcoming supply should far exceed—by Source Savills Research & Consultancy 3 Refers to Savills prime monthly rents for ground-fl oor retail units with good frontage and footfall.