Source: CBRE, 4Q 2023 ORCHARD ROAD SUPPLY AND DEMAND In 2023, islandwide retail market registered a positive net absorption of 0.8 million sq ft. The positive net absorption was supported by businesses in the F&B sector (e.g. Mister Donut, BHC Chicken, Tim Hortons), the fashion sector (e.g. Marimekko, ba&sh, Avenue on 3), as well as strong expansion of supermarkets (e.g. Don Don Donki, FairPrice Finest). Nonetheless, there were some prominent closures over the same period. These included businesses in the service sector (e.g. VS Monsoon) and entertainment sector (e.g. Cathay Cineplex). Due to changing preferences, intense competition and consolidation, 2023 also saw the closure of several gyms such as Pure Fitness, UFC Gym and Haus Athletics. Preferences have instead shifted towards boutique gyms which provide a more personalised experience and are closer to homes. Overall, with strong demand from F&B and fashion sector, openings outnumbered closures in 2023. Another trend observed in 2023 amongst the new openings and expansions was pop-up stores. In addition to testing the market, especially for new concepts, retailers are setting up pop-up stores to showcase limited-edition goods. The vacancy rate for islandwide retail contracted by 0.6 percentage points YoY to 6.5% in 4Q 2023 (from 7.1% in 4Q 2022). Similarly, vacancy rate in Orchard Road decreased by 0.6 percentage points YoY to 8.7% in the same period. With the recovery of visitor arrivals and hence return of tourist spending, retail sentiment of the Orchard Road submarket stays positive for 2024. The suburbanmarket has showed continued resilience and recorded a marginal increase in vacancy rate of 0.1 percentage points YoY to 3.9%. Rental Values Average islandwide prime retail gross rents increased by 4.2% YoY in 4Q 2023, a growth from 1.6% the year prior. With the recovery of tourist arrivals and return-tooffice trend, the retail market has been able to recover significantly. The increase in service charge has also contributed to the increase in prime retail rents. Prime Orchard Road rents increased by 1.5%QoQ and 5.1% YoY to S$36.30 per sq ft/month in 4Q2023. However, due to economic uncertainties, retailers remain cautiously optimistic about the market. Meanwhile, supported by stable and healthy footfall, prime suburban rents continued its resilience in 4Q 2023, registering positive rental reversion for 11 consecutive quarters, recording a 1.0% QoQ and 3.1% YoY growth to S$31.75 per sq ft/month. In 4Q 2023, rental premiums between the two markets have expanded due to stronger growth in Prime Orchard Road market as compared to Prime Suburban. Amidst the ongoing global economic challenges, the below-historical annual average new retail supply in the next few years alongside a recovered tourism sector, retail rents will continue to recover in 2024. 0.15 0.10 0.05 0.00 -0.05 -0.10 -0.15 -0.20 -0.25 -0.30 NLA (million sq ft) 1Q 2019 2Q 2019 3Q 2019 4Q 2019 1Q 2020 2Q 2020 3Q 2020 4Q 2020 1Q 2021 2Q 2021 3Q 2021 4Q 2021 1Q 2022 2Q 2022 3Q 2022 4Q 2022 1Q 2023 2Q 2023 3Q 2023 4Q 2023 Net Absorption (million sq ft) (LHS) Net New Supply (million sq ft) (LHS) Vacancy Rate Orchard Road (%) (RHS) Vacancy Rate Suburban (%) (RHS) Vacancy Rate Islandwide (%) (RHS) 15 10 5 0 -5 -10 -15 -20 -25 -30 Vacancy Rate (%) Overview Leadership Performance Framework Other Information ANNUAL REPORT 2023 97
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