Briefing Retail Sector
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Savills World Research Singapore Briefi ng Retail sector May 2015 Image: Capitol Piazza, Stamford Road SUMMARY Retailers are on overdrive to come up with new strategies to cope with a host of challenges. International tourist arrivals in City Hall area, bringing in many new- January and February fell 5.5% year- to-market brands. “Affected by externalities and on-year (YoY). Despite this, retail sales (excluding motor vehicles) increased In the Orchard area and CBD, policies which are beyond their 14.8% YoY in February. This is largely malls expected to complete this year due to the seasonally-heightened are 268 Orchard Road, National Gallery control, established retailers domestic spending pre-Chinese New Singapore and South Beach Tower. Year, which fell in February this year. In the suburbs, Waterway Point at who are fl ummoxed over how to Punggol will be completed in Q4/2015. Notwithstanding the positive retail curb the slide in retail sales in the sales performance in Q1/2015, prime Due to scant new supply coming retail rents in Orchard Road dipped up, vacancy in the Orchard Road Orchard Road shopping district 2.0% quarter-on-quarter (QoQ) to district is likely to remain low. S$32.2 per sq ft per month, while Rents may stay fl at due to pressures are doing the next best thing, suburban malls held fi rm at S$31.1 per from rising labour costs and tepid tourist sq ft per month. spending. Orchard rents are likely to which is to go into suburban The end of this quarter saw the hover at Q1/2015 levels, but with a slight malls.” Alan Cheong, Savills Research soft opening of Capitol Piazza in the downward bias, whilst suburban mall rents are likely to hold fi rm. MCI (P) 006/07/2014 Company Reg No. 198703410D savills.com.sg/research 01 Briefi ng | Singapore retail sector May 2015 Macroeconomic in the aftermath of the missing MH370 their in-store purchases delivered. overview incident and China’s tourism law of Developing an additional online Singapore’s gross domestic product late-2013 which banned zero- or presence may therefore be the way (GDP) growth in Q1/2015 is estimated negative-fare tours. The strength of the forward for traditional retailers. to be 2.1% YoY. The preliminary Singapore dollar against the currencies seasonally-adjusted unemployment of Malaysia, Indonesia, Australia and Rents & vacancy rate was at 1.8% in March. Europe was also to blame for the Despite the positive retail sales falling tourist arrivals. performance in Q1/2015, prime retail International tourist arrivals in January rents in Orchard Road dipped 2.0% and February fell 5.5% YoY, as tourist However, retail sales (excluding motor QoQ to S$32.2 per sq ft per month. numbers from Asia, Europe and vehicles) increased 14.8% YoY in This could be attributed to the fall Australia shrank. In February, it was February, largely due to seasonally- in tourist numbers as tourists form reported that the Chinese government, heightened domestic spending in the an important target segment for the in a move to crack down on corruption, run-up to the Chinese New Year. The Orchard shopping belt. On the other was battling attempts by overseas food and beverage (F&B) segment hand, suburban malls held fi rm at casinos to lure Chinese abroad. As continued its growth at 3.2% YoY, S$31.1 per sq ft per month, as more Singapore’s casinos serve as one of while sales for the watches and retailers are seen moving out from the its strongest tourist attractions, this jewellery segment, usually an indicator Orchard belt to the suburbs where has further crimped Chinese tourist for discretionary expenditure, was up the consistent and large catchment numbers following last quarter’s slump 2.6% YoY. That said, the latter increase of shoppers throughout the week is should not be interpreted as a revival the main draw. The chase for footfall of discretionary spending as the will drive up the demand for suburban GRAPH 1 Chinese New Year festive period could mall space and result in a decreased Growth of retail sales (excluding have triggered the higher jewellery demand for Orchard Road retail space, motor vehicles), YoY at current prices, sales and hence caused a seasonal thus gradually closing the gap between Jan 2011–Feb 2015 blip. their respective rents. As retailers are currently not generating suffi cient sales Retail sales (excluding motor vehicles) Watches and jewellery Market snapshot to overcome rising labour costs, overall 40% Annual job vacancies in Singapore’s retail rents are facing tenant resistance retail trade have been on an increasing which will probably continue over the 30% trend YoY from 3.7% in 2011 to 5.1% in next few quarters. 2014, refl ecting the labour conundrum 20% that the retail and services industry In Q1/2015, the island-wide vacancy is caught in. With declining margins rate inched up 1.0 percentage point 10% and restrictions on foreign hiring still (ppt) to 6.8%. With the completion of in place, retailers are fi nding it diffi cult Capitol Piazza and phases of Suntec 0% to fi ll vacancies at salaries that would City Mall’s additions and alterations not put them in the red. It is not (A&A) works, the vacancy rate in -10% surprising then that straddled with these the Downtown Core planning area problems, retailers are increasingly increased by 4.2 ppts to 11.7% while -20% resisting higher asking rents. that in the Orchard planning area was marginally up 1.6 ppts to 7.2%. The recent closure of three outlets of Source: Singapore Department of Statistics, Savills Research & Consultancy Marks & Spencer and John Little’s has Orchard Road and the brought to light the sluggish sales in CBD GRAPH 2 the department store segment, largely The end of this quarter saw the soft Prime retail rents, 2008–Q1/2015 due to the change in shoppers’ habits opening of Capitol Piazza in the City and preferences. According to the Hall area. The new mall brings many Singapore Department of Statistics new-to-market retailers such as: Italian Orchard Suburban 45 (SDOS), the annual retail sales growth premium casual-wear brand Napapijri 40 for department stores has slowed which is opening its fi rst South- signifi cantly during the last three years east Asian boutique; Julie-Nicole, a 35 from 2012 to 2014. This slowdown multi-label European luxury shoes 30 spurs department stores to seek new and accessories boutique; and Joli, a retailing strategies to differentiate luxury fashion and accessories store 25 themselves from both their traditional that brings in brands from France, 20 competitors and as well as online Italy, Japan, UK and Australia. Finnish 15 retailers. For example, following the design label Marimekko will also open S$ per sq ft month per sq per S$ announcement of the closure of some its fi rst standalone store in Singapore. 10 of its stores, the Al-Futtiam Group Among the many new gourmet 5 revealed its plans to invest in an online offerings in Capitol Piazza, famed roast 0 shopping platform for its Robinsons duck specialist Four Seasons from Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 chain, establishing an omni-channel Bayswater London and Parisian tea 2008 2009 2010 2011 2012 2013 2014 2015 presence where customers can have room Angelina, famous for its desserts, Source: Savills Research & Consultancy a click-and-collect service or have are slated to open by June. Another savills.com.sg/research 02 Briefi ng | Singapore retail sector May 2015 to note would be Kanda-Shinpachi, GRAPH 3 a Japanese omakase concept Retail vacancy rate, 2011–Q1/2015 restaurant, where the selection of the dishes is left entirely to the chef. Orchard Downtown Core Outside Central Region 14% Over at Orchard Road, following the 12% departure of several tenants from Scotts Square, new F&B concepts 10% such as Hong Kong-style restaurant London Fat Duck and Time & Flow 8% Champagne, a wine-and-champagne 6% bar, are slated to open in May. The third quarter will see the opening of 4% the fl agship boutiques of British luxury fashion house Alexander McQueen 2% and leather brand Delvaux from 0% Brussels, their fi rst in Singapore. The Pedder Group will house a variety of concepts such as Market Place, New Generation and Cool Kids as well as Source: Urban Redevelopment Authority (URA), Savills Research & Consultancy On Pedder Men’s Store in a 20,000-sq ft space on the second level. Global offi cially opened in mid-March. in Courts’ fl agship megastore at Its anchors include WE Cinemas who Tampines, while the fi rst JYSK store City Fringe and Suburban are operating a 10-hall Cineplex, and will occupy 9,000 sq ft in its new Bukit On the city fringe, the completion of gym operator Fitness First. Timah outlet. Vivocity’s asset enhancement initiative has added 15,000 sq ft of retail space Meanwhile, Courts, a furniture, Future supply at its Basement 1 which will open for electrical and IT products retailer, will 268 Orchard Road is expected to be business progressively from mid-April be launching a shop-in-shop concept completed in 2H/2015, while other onwards. Of the nine tenants, two with two international retailers – malls slated to open within this year are are new-to-market retailers, namely Ace Hardware, a US-based tool National Gallery Singapore and South American Eagle Outfi tters, a US and hardware brand, and JYSK, a Beach Tower, both in the CBD, and apparel brand, and Weekends, a multi- Danish chain that sells furniture and the suburban mall, Waterway Point, at brand lifestyle retailer.