CapitaLand Integrated Commercial Trust - Annual Report 2021

ORCHARD ROAD SUPPLY AND DEMAND tourism borders still largely closed in 2021, rents for prime Orchard Road declined 3.9% y-o-y to S$34.20 psf/month in 4Q 2021. That said, with retailers being cautiously optimistic in view of the economic growth and an eventual return of tourist spending, prime retail rents for Orchard Road started to stabilise in 4Q 2021 for the first time after seven quarters of decline. Meanwhile, prime rents in Suburban market stayed resilient and continued to register healthy reversionary rents, recording further rental growth of 0.5% quarter-on-quarter (q-o-q) and 2.0% y-o-y to S$30.10 psf/month in 4Q 2021, supported by strong demand for quality suburban retail spaces by retailers as well as extremely limited availability. As tourism continues to be challenged, coupled with the resilient Suburban market, the rental gap between Orchard Road and Suburban market narrowed further in 4Q 2021. 0.15 0.10 0.05 0.00 -0.05 -0.10 -0.15 -0.20 -0.25 4Q 2016 1Q 2017 2Q 2017 3Q 2017 4Q 2017 1Q 2018 2Q 2018 3Q 2018 4Q 2018 1Q 2019 2Q 2019 3Q 2019 4Q 2019 1Q 2020 2Q 2020 3Q 2020 4Q 2020 1Q 2021 2Q 2021 3Q 2021 4Q 2021 14.0 12.0 10.0 8.0 6.0 4.0 2.0 0.0 Net Lettable Area (million sq ft) Vacancy Rate (%) Net Absorption Orchard Road (sq ft) (LHS) Net New Supply Orchard Road (sq ft) (LHS) Vacancy Rate Orchard Road (%) (RHS) Vacancy Rate Suburban (%) (RHS) Vacancy Rate Islandwide (%) (RHS) Source: CBRE Singapore, 4Q 2021 Landlords like CICT are rejuvenating their retail and lifestyle offerings to capture new target markets. For instance, Raffles City Singapore will embark on an asset enhancement initiative from 1Q 2022 to 4Q 2022 to welcome more specialty retail and large format stores. New F&B offerings are also expected at CapitaSpring and Clarke Quay. Rental Values Amidst the current retail landscape, landlords have adopted a flexible stance in their rental expectations and continued to focus on tenant retention by adopting proactive leasing strategies. Islandwide prime retail rents fell by 2.2% y-o-y in 2021, significantly lower than the 8.7% y-o-y in the preceding year. There were signs of recovery in the retail market as observed from improved market sentiment and improving occupancies, but momentum remained halted by retightened measures. Due to recurring pressure on the retail market with volatile COVID-19 measures and CapitaLand Integrated Commercial Trust 104 Independent Market Review