Singapore – February 2020 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] Protracted uncertainty expected to linger RESEARCH Bleak forecast for retail sales as the outbreak takes a toll on tourist and Alan Cheong Executive Director domestic demand. Singapore +65 6415 3641 • Despite the rise in footfall to major malls, retail sales • Notwithstanding the viral outbreak, we do not believe that [email protected] (excluding motor vehicles) recorded 10 consecutive months rents for prime locations will be that much aff ected because Simon Smith of decline in November. tenants, once they give up their space, fi nd it diffi cult to Senior Director identify an alternative. Asia Pacifi c • In the same month, food and beverage (F&B) sales +852 2842 4573 continued their momentum with strong earnings for eight [email protected] straight months as fast food outlets and restaurants posted MCI (P) No. 009/08/2019 positive takings. “ As health experts still have no Company Reg No. 198703410D Savills plc handle on the full situation, Savills is a leading global real • The overall vacancy level held fi rm at 7.5% in Q4/2019 estate service provider listed on as occupancy gradually picked up in some malls after the London Stock Exchange. The we will have to look beyond company established in 1855, has enhancement and redevelopment works. a rich heritage with unrivalled growth. It is a company that leads this event to when business rather than follows, and now has over 600 offi ces and associates • Prime-facing retail units displayed resilience from further throughout the Americas, Europe, as usual resumes.” Asia Pacifi c, Africa and the Middle decline, with Savills monthly prime rents in the Orchard Area East. This report is for general informative purposes only. It may stabilising at S$29.40 per sq ft in Q4/2019. ALAN CHEONG, SAVILLS RESEARCH not be published, reproduced or quoted in part or in whole, nor may it be used as a basis for any • While some suburban malls faced resistance to rent hikes, contract, prospectus, agreement or other document without prior malls with consistently high footfall supported monthly consent. Whilst every eff ort has been made to ensure its accuracy, prime rents in the Suburban Area at S$28.80 per sq ft. 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 The rental market continued its recovery GRAPH 1: Retail Sales And F&B Sales Growth, January The advance estimates released by the for a second quarter, with the Urban 2014 to November 2019 Ministry of Trade and Industry (MTI) showed Redevelopment Authority’s (URA) retail rental F&B Sales Retail Sales (excluding motor vehicles) Singapore’s economy expanding by 0.8% index in Central Region trending up by 2.3% 15% year-on-year (YoY) in Q4/2019. In the third quarter-on-quarter (QoQ) in Q4/2019. This quarter, it expanded by 0.7% YoY. With a full- could be led by positive rental reversions in 10% year growth of 0.7% YoY for 2019, the local some of the better-managed and well-located economy recorded its slowest growth since the malls, especially the new and renewal leases 5% global fi nancial crisis of 2008/9. The main drag with F&B tenants whose sales are holding up. came from the manufacturing sector which Prime-facing retail units displayed resilience 0% contracted by 1.5% in 2019. The labour market from further decline, with Savills monthly showed its resilience with a higher employment prime rents6 in the Orchard Area stabilising 1 2 at S$29.40 per sq ft in Q4/2019. For suburban YOY CHANGE YOY -5% growth and stable retrenchment level in 2019, even though the unemployment rate edged up malls with consistently high footfall from nearby residential areas, regional centres -10% to 2.3% in the face of the economic slowdown. While there is an increase of footfall to and major transport hubs stayed strong, major malls, this did not result in higher maintaining monthly prime rents in the -15% tenant sales. Retail sales (excluding motor Suburban Area at S$28.80 per sq ft (Graph 3). Jul Jul Jul Jul Jul Jul Jan Jan Jan Jan Jan Jan Oct Oct Oct Oct Oct Oct Apr Apr Apr Apr Apr Apr vehicles)3 recorded 10 consecutive months of 2014 2015 2016 2017 2018 2019 YoY decline in November 2019 as furniture FAST FOOD AND TAKEAWAY DRIVE Source Singapore Department of Statistics, stores and jewellery receipts continued to F&B FOOTPRINT Savills Research & Consultancy decline (Graph 1). This could be attributed to Some F&B players were actively expanding last intensifi ed competition from the global online year, notably the fast food sector which saw marketplace amid increasing ease of internet robust growth for almost two years. Following GRAPH 2: Vacancy Rates, 2011 to 2019 access. Although local e-retail sales4 have their debut in Jewel Changi Airport, fast food been trending up for almost a year, overseas chain A&W opened its second outlet at AMK Island-wide Downtown Core Orchard Suburban Area e-commerce giants continue to absorb a Hub while Shake Shack burger joint expanded 12% signifi cant share of total retail expenditure in its footprint at the former Eng Aun Tong factory Singapore. along Neil Road. Jollibee has been on a massive expansion drive with another three new 10% On the other hand, the F&B sector continued its momentum with strong earnings5 for branches at Woodlands MRT station, Punggol eight straight months in November (Graph Waterway Point and Suntec City within the 8% 1). The positive takings at fast food outlets short span of a year. In December, American and restaurants could be lifted by the rise in burger chain Five Guys unveiled its fi rst branch 6% food delivery because of the convenience of in Singapore, occupying over 4,950 sq ft at the online ordering and access to a wider variety of entrance to Plaza Singapura. The expanding food delivery companies have actually been 4% options. synergistic partners to the F&B sector because EXTENDED RENTAL GROWTH it extends their catchment and could partially 2% ACROSS THE BOARD explain why the sector is expanding. In the fourth quarter, the island-wide retail Some foreign F&B entrants were also 0% market saw a signifi cant supply injection aggressive market entrants. While new bubble 2011 2012 2013 2014 2015 2016 2017 2018 2019 of 657,000 sq ft, raising total retail stock to tea chains including CHICHA San Chen and Source URA, Savills Research & Consultancy almost 67.1 million sq ft. The new supply mainly The Whale Tea set up nine and four stores came from the completion of Tekka Place and respectively within a year, yogurt drink brand Canberra Plaza. Yomie’s Rice x Yogurt opened its fi rst three GRAPH 3: Prime Retail Rents, 2008 to 2019 The overall vacancy level held fi rm at 7.5% stores in the last quarter of 2019. In early-2020, in Q4/2019. This is despite higher vacancy Hong Kong dessert chain Hui Lau Shan pressures forming in parts of Central Region returned to the local scene with its fi rst branch Orchard Area Suburban Area 37 due to vacated premises in the Somerset at NEX, and two more at Chinatown Point Subzone and the new supply from Tekka Place and JEM. Nonetheless, the retail scene is still (Graph 2). Leasing demand was supported by challenging for some like ice cream joint Cold 35 malls such as Suntec City Mall and Funan, Stone Creamery which shut all of its remaining where occupancy gradually picked up after the three outlets at Waterway Point, VivoCity and 33 completion of enhancement and redevelopment HillV2 mall after 10 years of operations. works respectively. The vacancy level in BATTLE OF THE DISCOUNT STORES 31 suburban malls also remained relatively stable because of new major tenants such as Don Don Other than infi lling more F&B tenants, S$ PSF PM S$ PSF Donki which recently opened in JCube. landlords have been refreshing their retail mix 29 1 According to Labour Market Advance Release 2019 by to bring in greater footfall, therefore justifying Ministry of Manpower (MOM), total employment growth (excluding Foreign Domestic Workers) in 2019 (55,200) is their rental expectations. Especially with the higher than 2018 (38,300). 27 2 Total annual retrenchments in 2019 (10,700) remained shift to value-based spending, consumers are similar to 2018 (10,730). increasingly seeking value-for-money deals. 3 Retail Sales Index at Constant Prices, Monthly (exclude any online orders which are sent from foreign addresses). This in turn has opened up an opportunity for 25 Updated as at 14 January 2020. 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 4 Only includes online retail orders which are sent from some retailers to embark on further expansion. local addresses. Source Savills Research & Consultancy 5 Food & Beverage Services Index at Constant Prices, 6 Savills estimated rent for a 1,000-sq ft prime ground fl oor Monthly. Updated as at 14 January 2020. unit let to a fashion retailer. savills.com.sg/research 2 Retail TABLE 1: Major Projects In The Pipeline, 2020 to 2030 ESTIMATED COMPLETION DEVELOPMENT LOCATION ESTIMATED NLA (SQ FT) 2020 Northshore Plaza I Northshore Drive 62,200* 2020 IMall Marine Parade Central 50,300* 2020 30 Raffl es Place Raffl es Place 51,400 2021 A&A to existing Shaw Plaza Balestier Road 65,500* 2022 The Woodleigh Mall Bidadari Park Drive 96,800* 2023 Punggol Digital District Punggol Way 175,200* 2023 Sengkang Grand Mall Sengkang Central 52,800* 2030 Changi Airport Terminal 5 Tanah Merah Coast Road 435,400* Source Company announcements, The Straits Times, URA, Savills Research & Consultancy *Savills estimation, based on an effi ciency rate of between 70% and 75% Unlike the existing stores, Miniso introduced its fi rst $2 concept travel restrictions from the Chinese market, negative sentiment toward the retail sector stores at HarbourFront Centre and IMM in October.