Positive Momentum for Retail Real Estate in Q2 2022, with Rents of Suburban Malls Witnessing Strongest Quarter-on-quarter Growth at 1.8%
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  • 14 July 2022

Positive Momentum for Retail Real Estate in Q2 2022, with Rents of Suburban Malls Witnessing Strongest Quarter-on-quarter Growth at 1.8%

SINGAPORE, 13 July 2022 – In the midst of the endemic transition, Singapore’s retail real estate market reported positive momentum in Q2 2022, with rents across all three submarkets showing continued quarter-on-quarter (QoQ) rental growth.

In Q2 2022, average monthly retail rents in the Fringe/Suburban Areas submarket continued to outperform, increasing 1.8% QoQ to reach S$31.90, while that in Orchard/Scotts Road submarket rose 1.2% QoQ to S$37.30.

This is according to the EDMUND TIE’s Q2 2022 quarterly report, Real Estate Times, Q2 2022 that is released today.

Average monthly retail rents (S$ per sq ft)

Table on average monthly retail rents in Q2 2022

Source: EDMUND TIE Research

Mr Lam Chern Woon (蓝振文), Senior Director of Research and Consulting at EDMUND TIE, says, “With Singapore moving ahead with greater easing of both pandemic and border restrictions, the retail climate is absolutely brightening. It’s not surprising to see retail rents in the Fringe/Suburban Areas submarkets witness the strongest QoQ growth; leasing demand in this submarket has remained buoyant during the quarter, with openings such as Daiso opening its flagship store in Jurong Point, as well as Ben & Jerry’s and Fragrance in VivoCity.”

As consumers return to a normalcy of shopping, socializing and dining out, there will be increased footfall and spending in F&B stores and shopping malls. For the first five months of this year, retail spending at department stores grew by 27.7%, compared to the same period in 2021; this is also an acceleration from the 7.6% growth for the whole of 2021. Reflecting the nation’s penchant for dining and socializing, growth of dine-out sales has also rebounded by 12.3% YoY in the first five months of this year, compared to 3.9% growth for the whole of 2021.

“Nonetheless, with the ongoing geopolitical uncertainties and rising inflation, the strength of consumer spending, while growing, is expected to be capped,” comments Mr Lam. “Under this economic climate, while the prime shopping belt in Orchard/Scotts Road is likely to benefit from the steady recovery of tourist arrivals and spending, the majority of consumer spending in the days ahead are expected to veer towards non-discretionary items. With firming leasing demand, we expect suburban retails rents to grow 8% in 2022, and other segments seeing between 3-5% rental growth.”

Highlights of other real estate sectors:
Investment

  • Total investment sales for Q2 2022 experienced a significant 32% QoQ decrease after reaching a two-year high in the previous quarter.
  • The residential sector led the investment sales in the quarter, contributing S$3.3 billion (49%), followed by the retail sector at S$1.38 billion (21%). The bulk of total residential sales was led by the public investment sales market.

Sectoral contribution to Q2 2022 investment sales

Chart on sectoral contribution to Q1 2022 Investment sales

  • Given the strong performance in the first half of 2022, investment transaction volume is expected to maintain its current momentum for H2 2022. The market is currently on track to achieve approximately S$25 billion worth of investment volumes with possible upside for the entire year.

Office

  • The overall occupancy rate for office spaces in the CBD was maintained at 93.8% in Q2 2022.
  • Average monthly gross rents (S$/sq ft)
Table on average monthly gross rent in Q2 2022

Source: EDMUND TIE Research

  • The office market has gained traction with the growth in the technology and the finance sectors, especially the wealth management industry as a key driver of office demand.
  • Despite recent headwinds facing the technology sector, the outlook for office remains positive, with the expectation of increasing rents and occupancy rates, particularly in prime CBD office spaces.

Industrial

  • In Q2 2022, the strong export growth and manufacturing performance drove multiple-user factory rents to rise by 1.5-2.0% QoQ. Rents of first-storey multiple-user factory space stood at S$1.86 per sq ft. Amid flight to quality, hi-tech spaces continued to be sought-after, and rents rose by 2% QoQ in Q2 2022.
  • A moderation in overall industrial rental growth is expected, following its upward trend seen in the past six quarters. However, warehouse spaces could witness up to 7-8% rental growth for the year, supported by sustained strong demand amid tight supply and supply chain disruptions.
  • With a limited supply pipeline, rents of business parks located in the central region are anticipated to rise by up to 4% this year, given the full back-to-office workforce and the office market recovery.

Residential

  • While the cooling measures will dampen sales momentum, the overall market remains supported by a robust labour market, ongoing economic growth, and healthy demand-supply dynamics in the property market. The opening up of our borders will also help re-inject foreign buying demand. However, inflationary pressures, interest rate hikes and negative wealth effects from financial market weakness could cap homebuying demand.
  • On the back of slower overall launch activity this year, EDMUND TIE’s base projection is a moderation of primary sales to about 10,000 units for 2022.
  • Price growth has gained momentum in Q2 2022. Considering the economic and geopolitical headwinds, as well as rising interest rates, property price growth could reach around 8% in 2022. However, strong pressure on developers to reduce prices is not expected, especially for projects with limited unsold inventory.

 

Download the full report here.

END

For further information, please contact:

Seah Li Ching (Ms)

Corporate Communications

DID: +65 6393 2369

Email: liching.seah@etcsea.com

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