PDF versionDespite the Singapore property market painting a picture of cautious moderation lately, the retail sector has been undergoing a series of upbeat transformations that promises to provide more than just an aesthetic facelift for the retail scene. By early 2009, three new malls in Singapore namely West Coast Plaza, Illuma and ION Orchard are projected to be ready to welcome shoppers, while a few other shopping developments would have completed some form of extension or redevelopment to their existing retail space.
This fresh injection is slated to introduce five million square feet of new retail space to the market from the second half of 2008 to end-2009. Up to 60% of which will be in the Central Region to cater to retailers’ traditionally high demand in the area accordingly. However, in the midst of shoppers rejoicing over larger and more novel malls, will retailers and landlords face a possible over-supply situation resulting from this substantial increment?
Despite the anticipated larger supply of retail space, retailers and landlords need not be overly concerned, as population growth had preceded the increase in retail supply over the past five years to provide the critical mass required to support the growing retail sector. Since 2004, the ratio of available retail stock to Singapore’s total population had decreased by 7.2% to reach 7.40 sq ft per capita in 2007 vis-à-vis 7.97 sq ft per capita in 2004 due to the growing population. In essence, there is approximately 7.40 sq ft of available retail space per person as at end-2007. Compared to Hong Kong’s ratio of about 16.2 sq ft per capita, Singapore has room to expand its retail stock further based on its current population.
Tourism figures have also been robust, with 10.3 million visitors and S$13 billion in tourism receipts recorded in 2007. Being an integral part of the domestic retail market, the tourism sector has benefited from several initiatives introduced by the Singapore Tourism Board aimed to lure the tourist dollar. These initiatives are apparently effective, as visitorship has maintained its perfect streak of Occasional Research Brief www.2 knightfrank.com record arrivals for every month since January 2008, boosting the retail sector especially within the Central Region. In total, 4.26 million visitors were recorded in the first five months of 2008 representing a 4.3% increase in visitor arrivals over the same period last year. With a fast-rising population coupled with strong visitor arrivals, growth in retail space is imperative to sustain the quality of shopping experience.
The projected supply of five million square feet of retail space, which is expected to be completed between 2008 and 2009, will therefore, serve to relieve the supply crunch seen over the past couple of years. Pent-up demand for retail space in the area, brought about by government initiatives to boost tourism, such as the inaugural Formula One night race, is likely to absorb most of the oncoming supply. The potential supply, other than temporarily easing the escalating rentals, is also expected to invigorate the local retail scene. For instance, it has been more than a decade since a new mall has appeared in the premier Orchard Road shopping area. These new additions are envisaged to provide the much-needed rejuvenation in the area.
With consumer expenditure spreading over a larger retail stock, there have been concerns that retail sales per square foot of available retail space will fall as a result. To allay these fears, the rise in nominal retail sales (excluding motor vehicles) over the next three years is still projected to outpace the increase in retail stock. The nominal retail sales figure is anticipated to rise from S$650.60 per square foot in 2007 to almost S$700 per square foot in 2010.
Therefore, this potential new supply in the retail sector will be positive news for both retailers and consumers. Retailers can look forward to choice shop space and higher retail sales per square foot while consumers can expect a more exciting retail scene coming their way.
Nicholas Mak, Director of Consultancy & Research Department, Knight Frank, +65 6228 6821
Knight Frank and its New York-based partner, Newmark Knight Frank, operate over 140 offices in established and emerging property markets on five continents. Last year, the companies handled transactions valued at over $41billion with annual revenues of over $545 million.
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