Savills World Research Singapore Briefi ng Retail sector May 2018 Image: Capitol Building, 15 Stamford Road SUMMARY A gradual pick-up in retail rents is expected in the near term. For January and February, Prime monthly rents in Orchard combined retail sales (excluding motor Road and the suburban areas “Current determinants driving vehicles) increased 1.1% year-on-year remained at S$29.90 per sq ft and (YoY) due to festive spending and S$28.80 per sq ft respectively. consumption and tenant tourism receipts, which were boosted behaviour are vectoring by more visitor arrivals. Domestic consumption is being supported by increased employment up rents, glossing over Owing to the lack of new retail within the disruptive and augmentative supply in Q1/2018, the island-wide business sectors while the opening of fundamental weaknesses.” retail vacancy rate saw a marginal new malls is causing rents, particularly Alan Cheong, Savills Research increase of 0.1 of a percentage point in the suburban areas, to rise 2.0% to (ppt) from last quarter to 7.5%. 5.0% YoY in Q1/2018. MCI (P) 142/07/2016 Company Reg No. 198703410D savills.com.sg/research 01 Briefi ng | Singapore retail sector May 2018 Macroeconomic GRAPH 1 overview Growth of retail sales (excluding motor vehicles), According to the Ministry of Trade YoY at constant prices, 2012 – Q1/2018 and Industry’s (MTI) preliminary estimates, the Singapore economy Retail sales (excluding motor vehicles) Wearing apparel & footwear Food retailers grew 4.3% YoY in Q1/2018, up 50% from the 3.6% YoY expansion in 40% the preceding quarter. Growth was mainly led by the brisk performance 30% in the manufacturing sector, which 20% rose from 4.8% YoY in Q4/2017 to 10.1% YoY in Q1/2018. All clusters 10% within the sector expanded, with the 0% electronics and precision engineering clusters recording the highest -10% growth. -20% In line with the pick-up in economic -30% Jul Jul Jul Jul Jul Jul Jan Jan Jan Jan Jan Jan Jan Sep Sep Sep Sep Sep Sep Mar Mar Mar Mar Mar Mar Nov Nov Nov Nov Nov Nov May May May May May activity, the job market also improved May in Q1/2018. Preliminary data 2012 2013 2014 2015 2016 2017 2018 from the Ministry of Manpower’s Source: Singapore Department of Statistics, Savills Research & Consultancy Labour Market Report Advance Release Q1/2018 showed that the unemployment rate continued to fall, into Singapore’s retail market, Centre. Hong Kong chain Tsui Wah down to 2.0% in March 2018 from particularly food chains offering is also launching in Singapore, 2.1% in December 2017. The number takeaway options. Say Chiizu cheese with plans to open its fi rst outlet in of retrenchments also declined toast from Thailand has massive Southeast Asia soon. from 3,680 in Q4/2017 to 2,100 in expansion plans in Singapore, setting Q1/2018. Despite the drop in layoffs, up takeaway kiosks in the central and Lastly, Millennium Dance Complex, a consumers seem to have cut back on suburban areas. Within one week dance studio from the United States, spending as there was no signifi cant in January, it opened its fi rst four set up its fi rst Singapore branch at increase in expenditure for the fi rst branches in Singapore: at VivoCity, Marina Square, taking up three units two months of 2018. 313 @ Somerset, White Sands on the second fl oor. Shopping Centre and The Clementi During the Chinese New Year festive Mall. In addition to a takeaway Orchard Road and the period this year, consumers spent outlet at Waterway Point, opened CBD less at restaurants and on catering, in February, the Bangkok cheese Facing competition from e-commerce resulting in a 5.1% YoY dip in the toast brand opened its fi rst and only and fast fashion labels such as Zara and H&M, less resilient brands have combined Food & Beverage (F&B) dine-in café, with an open kitchen 1 been forced to exit the market. As Services Index for January and concept, in Singapore at Bugis+. part of a shift in focus to its growing February 2018. While the combined Once it completes plans to open brands, Gap shut all of its stores retail sales (excluding motor vehicles) ten branches in Singapore by end- 2 data for the two months showed at Suntec City and VivoCity while 2018, Say Chiizu will launch another an increase of 1.1% YoY due to Banana Republic closed outlets at outlet at Jewel @ Changi Airport in the expenditure on food retailers Paragon and MBS in February. In early-2019. (+14.0% YoY) and apparel & footwear the same month, American Eagle (+9.2% YoY), the bump could be Outfi tters also left the market with Some brands make Singapore driven by holiday spending and the closures of its Suntec City outlet their fi rst port of call when they improved visitor arrivals. Total tourist and VivoCity fl agship store. Later in begin expanding their presence in arrivals reached a record high of March, Cortina Holdings vacated all Southeast Asia’s retail market. In almost 3.05 million in both months, of its Orchard Road-facing watch 7.3% higher than a year ago. This January, Taiwanese bakery Kazo boutiques on the fi rst and second was led by the 21.7% and 12.3% opened its fi rst confectionary store level of Wisma Atria, leaving 4,700 surge in arrivals from India and China in Singapore at Chinatown Point. sq ft of space unoccupied. The retail respectively. Subsequently in March, Austrian chain retained only its Raymond Weil bakery Guschlbauer launched its fi rst Boutique on the third level of Wisma Market snapshot store for Southeast Asia at Waterway Atria. Following the infl ux of Japanese Point. After operating a pop-up retailers, other foreign brands at Casa Verde cafe in Singapore In the sea change disrupting the recognised potential and ventured Botanic Gardens for eight months, retail landscape, pop-up stores are still on the rise as retailers test new 1 Sales Index of Food & Beverage Services at Constant Mui Kee opened a permanent venue Prices (Seasonally Adjusted), Monthly. Updated as at 13 at Orchard Road. The new 50-seat markets with temporary stores while April 2018. restaurant will take over the space landlords try to fi ll vacancies. The 2 Retail Sales Index at Constant Prices (Seasonally vacated by Caveau Bar in Shaw pop-up concept used to be popular Adjusted), Monthly. Updated as at 13 April 2018. savills.com.sg/research 02 Briefi ng | Singapore retail sector May 2018 among e-retailers trying to reach a tenants also help to drive footfall Although retail vacancies in some wider audience, but the model has traffi c in malls. Later this year, one of areas increased marginally, spaces since grown beyond online retailers the top Japanese cooking schools, in prime locations (stressed) within to encompass established fashion ABC Cooking Studio, will open its well-managed malls are still in high labels as well as luxury brands. second studio at Westgate. demand, leading to mild rental In general, pop-ups benefi t both increases. According to the Urban landlords and retailers. While the Rents and vacancy Redevelopment Authority (URA), the unique concept draws in crowds to From Q1/2015 to Q1/2018, island- retail rental index for Fringe Area malls, pop-ups also help to build wide retail stock expanded at a went up by 0.3 of a ppt QoQ, while buzz for brands. As the lease terms compounded annual growth rate Central Area (including Orchard are often shorter, pop-up stores (CAGR) of 0.8%, down from the Road) rose 0.2 of a ppt QoQ in are a more cost-effective option to 2.3% recorded for the period Q1/2018. After three consecutive create physical presence in premier Q1/2012 to Q1/2015. Owing to years of quarterly decline, the rental shopping belts like Orchard Road a lack of substantial new retail index for Central Region inched up and Marina Bay Sands (MBS) where supply in Q1/2018, the island-wide 0.1 of a ppt. Nonetheless, some rents are on the high side. retail vacancy rate had a marginal increase of 0.1 of a ppt from last landlords may be fl exible on rents Some luxury brands have realised quarter to 7.5%. The slight increase in order to maintain their targeted that pop-up stores help to promote in vacancies was led by the addition tenant mix. As such, Savills prime marketing campaigns in different of 118,000 sq ft of net new stock as monthly rents in Orchard Road seasonal launches and can the occupied retail space remained stayed fl at at S$29.90 per sq ft in constantly surprise customers with unchanged in the quarter. Q1/2018. refreshing shopping experiences. Following the launch of Chanel’s GRAPH 2 pop-up store at MBS last year, Miu Prime retail rents, 2008 – Q1/2018 Miu opened a 1,205-sq ft disco- themed shop space at Paragon while Orchard Suburban 45 Fendi brought in its Fendi Kiosk to ION Orchard in February. 40 City fringe and suburban In contrast to footfall decline at some 35 shopping centres along Orchard Road, suburban malls performed 30 better, buoyed by factors such S$ psf pm as convenience and proximity 25 to captive markets in perimeter neighbourhoods. For instance, the newly-expanded Northpoint City 20 enjoys high foot traffi c due to its accessibility to the MRT station 15 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 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 and bus interchange.