Most new entrants in Asia Pacific retail markets last year were in the food-and-beverage sector, according to CBRE Research’s latest report on regional retail trends.
It found that 33 per cent of new brands were in the coffee and restaurants category, exceeding the 22 per cent in 2014.
CBRE’s annual monitor of cross-border retail activity also found that the number of new retail entrants into and across the region continued to rise, with more than 500 over the course of the year. New entrants are defined by CBRE as cross-border retailers that opened their first standalone store for trading.
“The proportion of F&B in Singapore’s retail malls has increased and now makes up about an average of 25 to 30 per cent,” says CBRE retail services director Letty Lee. “There is no denying that for every F&B operator that signs a lease, there are a few who exit.”
Singapore ranks second in Asia Pacific for the number of new cafes and restaurants, comprising 23 of the 63 new entrants. The company predicts international retailers will have more chances to enter the Singapore market as rents decline.
In the first quarter of this year, rents for Singapore’s prime Orchard Rd and the suburbs have steadily declined. Prime Orchard Rd rents eased 0.6 per cent from the previous quarter to S$42.85 (US$31.87) a sqft per month in the first quarter, while prime suburban rents inched downward by 0.8 per cent to S$29.65.
“The tough leasing climate has prompted some landlords to further adjust rental expectations, especially in areas where competition is stiff and foot traffic relatively poor,” says CBRE research head for Singapore/Southeast Asia Desmond Sim. Ongoing structural changes in the retail market have continued to dampen occupier demand, and retailers are still grappling to cope with changes in market dynamics and consumer sentiments.
CBRE says demand is likely to stay patchy, with retailers expected to be even more discerning about store location and openings. This does not bode well for overall occupancy as more supply is scheduled to come on line from now until 2019. Half of this upcoming supply will emerge from the suburban area.
Overall, prime retail rents are forecast to decline by another 2 per cent during the rest of this year.
