Prime retail rents to see further recovery in 2023, with Orchard Road leading the way

The retail market in Singapore regained momentum in the second half of 2022, with social distancing measures easing and borders reopening. According to Knight Frank’s research data, average prime rents for retail spaces throughout the island rose 1.7% quarter on quarter in the fourth quarter of 2022, achieving an annual growth of 2.6%.

The leading sub-market, in terms of rental growth, was Orchard Road, where prime retail spaces registered a y-o-y rise of 3.1% to $29.10 psf per month in the fourth quarter. The rise in rents was supported by the resurgence of international tourists, as well as the return of office-based employees.

Edmund Tie Research’s report further revealed the high demand for retail spaces in the Orchard area. Prime first-storey retail space on Orchard and Scotts Road saw the highest rental growth for the year, increasing by 7.4% to $39.20 psf per month. In the fringe and suburban areas, rents grew by 6.7% in 2022, while in other city areas, it grew by 3.7%.

Net absorption of retail spaces also rose substantially in the third quarter of 2022—totalling 323,000 sq ft, which is four times higher than the figure in the previous quarter. Lam Chern Woon of Edmund Tie is Tengah EC optimistic about the retail property market in the year ahead, expecting it to benefit from the ongoing growth of the tourism sector.

Knight Frank’s Ethan Hsu also believes that prime retail rents are on the way up this year. Citing the reduction of pandemic-related measures and the more stable economic outlook, Hsu expects prime retail rents to grow by 3 to 5%, with Orchard Road leading the charge.