Economic Boost in Q1 2024
In the first quarter of 2024, Singapore's economy saw substantial growth fueled by significant events and international performances. The Singapore Airshow, held in February, along with concerts by Coldplay, Mayday, and Taylor Swift, attracted numerous visitors, contributing to economic expansion. The retail trade sector grew by 2.7% year-on-year, recovering from a 0.3% contraction in the previous quarter. This growth was driven by higher sales volumes of motor and non-motor vehicles. Similarly, the food and beverage services sector grew by 1.1% year-on-year, rebounding from a 1.5% contraction, driven by increased sales at food caterers, cafes, and food courts.
Retail Space Market Dynamics
Retail space prices increased by 1.8% in Q1 2024, up from 1.2% in Q4 2023, reflecting strong demand. Despite a reduction in the number of retail spaces from 85 units in Q4 2023 to 62 units in Q1 2024, the overall value of retail transactions also declined from $175.3 million to $107.8 million. However, the first four months of 2024 showed a positive trend, with a 23.9% year-on-year increase in retail space transactions and a 34.8% increase in total transaction value compared to the same period in 2023.
Significant Retail Transactions
Notable transactions in early 2024 included the sale of a unit at Royal Square at Novena for $11.0 million ($4,121 psf) and a ground-level unit at Lucky Plaza for $10.5 million ($15,242 psf). These transactions underscore the high value and demand for strategically located retail properties in Singapore.
Retail Rental Market
Retail rental rates saw a slight moderation of 0.4% in Q1 2024. The moderation in rental rates was influenced by evolving tenant demand, consumer behavior trends, and strategic pricing by property owners. Despite the overall moderation, the Outside Central Region (OCR) experienced a significant increase in median monthly rentals, rising by 10.6% quarter-on-quarter to $21.77 psf in Q1 2024. This growth highlights robust demand in suburban areas driven by increased consumer footfall and expanding retail activities.
Retail Space Occupancy and Vacancy Rates
The volume of retail rental transactions moderated by 21.5% quarter-on-quarter in Q1 2024, with the total leasing value also decreasing by 24.6%. The occupied retail space increased by 8,000 square meters, while the stock of retail space expanded by 19,000 square meters. Consequently, the island-wide vacancy rate of retail space rose to 6.7% from 6.5% at the end of the preceding quarter, indicating a slight increase in available retail space.
Outlook
The continued recovery in air travel and tourism is expected to support growth in tourism-related sectors, including retail trade and food & beverage services. The Singapore Tourism Board (STB) anticipates international visitor arrivals to reach between 15 to 16 million in 2024, generating $26.0 to $27.5 billion in tourism receipts. This influx of visitors is likely to drive up retail sales, particularly in key shopping districts and tourist areas. New hotel openings, enhanced experiences at integrated resorts, and a vibrant array of leisure activities will attract more visitors, increasing foot traffic and spending in retail establishments.
Overall, the anticipated growth in tourism, combined with strategic developments in the retail industry, presents a promising outlook for Singapore's retail sector in 2024.
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Prepared By:
Mohan Sandrasegeran
Head of Research & Data Analytics
