New fashion and lifestyle brands spur recovery in retail sector

International retailers have burst onto the scene in 3Q2023, driving up occupancy of prime retail space across Orchard Road and other areas in Singapore’s Central Region. Predominantly composed of F&B players, an increasing number in fashion and lifestyle have made their appearance, and some are using Singapore as a launchpad for further regional expansion, according to Wong Xian Yang, Cushman & Wakefield’s head of research for Singapore and Southeast Asia.

Chinese activewear label Neiwai opened its first Southeast Asian store in Singapore’s Raffles City in July, while Finnish clothing brand Marimekko entered Ion Orchard in September and is eyeing up further expansion in Malaysia and Vietnam.

French patisserie Cedric Grolet unveiled its first Asian outlet in Como Orchard in the same month. Swiss brand Clinique La Prairie, in partnership with Singapore-based investment firm RichL Group, opened its first holistic health boutique in Marina Bay Sands Hotel Tower 3 in July.

International doughnut chain Mister Donut opened its first store at Junction 8, while Australia-based Chaffic launched at Westgate and Frozen Heart, Taiwan’s fried ice cream chain, opened its first overseas outlet at Jewel Changi. What’s more, avocado dessert chain Avocadoria opened its first international franchise at Ang Mo Kio Hub.

The arrival of new foreign brands, particularly in the F&B field, has caused many to open their first store outside the Central Region. Whilst the 2020 pandemic has posed a challenge to the retail market, the URA retail rental index has seen two back-to-back quarters of slight increases – 0.5% q-o-q in 3Q2023 and 0.3% q-o-q in 2Q2023 – as noted by Leonard Tay, Knight Frank Singapore’s head of research.

Developers recognise the potential of Holland Village MRT Condo and the educational opportunities it offers. They have launched several residential developments that not only provide potential homeowners with access to the area, but to a wealth of varied educational experiences for their children. Not only this, but the unique neighbourhoods of Holland Village also serve to create an environment of vibrancy and growth, while at the same time encouraging the social and intellectual development of students from nearby schools.

Local lifestyle brands, however, have been quick to capitalise on their increased exposure to digital savvy shoppers by leveraging the power of social media viral trends, such as The Paper Bunny and Beyond The Vines.

In the Downtown Core, demand for retail space rose by 118,403 sq ft in the third quarter of 2023, owing to the completion of phase 1 of Guoco Midtown and The M at Beach Road. The vacancy rate dropped from 10.6% to 7.9% – the lowest since 4Q2019. This, according to Tricia Song, CBRE head of research for Singapore and Southeast Asia, is likely to have driven more retailers to take up space in Downtown Core locations due to improved return-to-office trends.

Overall, however, islandwide vacancies rose slightly to 7.2%, up from 7% in 2Q2023, thanks to a 0.2% jump in the Outside Central Region to 4.2%. Meanwhile, the Central Region saw a 0.4% decrease to 8.8%, a result Angeline Phua, JLL’s consulting director of research and consultancy, Singapore, attributed to a “resilient occupier demand”.

Rents and other operating costs remain a challenge as retailers consolidate their spaces and some are forced to call it quits. Nevertheless, Singapore’s resilient consumption remains attractive to foreign brands, and so is its increasing visitor arrivals, with China reclaiming its top spot as Singapore’s premier source market in 3Q2023, contributing 581,000 visitors.

Upcoming developments, such as One Holland Village and Pasir Ris Mall, have reported high pre-commitment rates, an indication of a healthy demand for retail space. Landlords are likely to maintain their rental expectations alongside rising costs, and it’s likely that rental recovery in the Central Region will see a rise in the future due to limited prime space availability and a return of Chinese outbound tourism.