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  • Singapore’s Retail Spaces Set for a 2% Rent Hike This Year—What It Means for Shoppers and Stores!

    Singapore’s Retail Spaces Set for a 2% Rent Hike This Year—What It Means for Shoppers and Stores!

    Amid a landscape of recovering tourist arrivals, Singapore’s retail sector is preparing for a bumpy ride, navigating uncertain economic waters. A recent report by Savills highlights that while there is potential for growth, particularly from the influx of tourists, the economy is set for subdued performance through the latter half of the year. This is primarily due to anxieties surrounding Liberation Day tariffs and a notable decline in non-oil domestic exports, which many businesses rushed to ship in anticipation of these increased costs.

    Retail Struggles Amid Economic Uncertainty

    Domestic-oriented sectors, particularly retail and food & beverage, are feeling the pinch, having reported subdued performance in the first half of the year. Savills notes that while the distribution of government consumption vouchers, such as CDC and SG60, could provide a temporary boost to retail activity, a sideways trend in overall sales is anticipated. This stagnation is largely fueled by cautious hiring sentiments and the softening indicators of resident employment, which could further limit consumer spending power. Adding to the complexity is Singapore’s strong currency, which continues to tempt shoppers to look overseas for value.

    Suburban Resilience Amid Central Region Pressures

    Interestingly, while the retail market braces for a challenging period, the tapering supply pipeline could bring some stability to occupancy rates and rents in the next two years. However, the overarching mood remains cautious, with both hiring and spending expected to lag. Suburban malls, particularly those well-connected to transport hubs and serving dense communities, may find themselves somewhat insulated from these broader industry challenges. In contrast, malls located in the Central Region are likely to experience continued pressure from declining spending power.

    A Shift in Tenant Dynamics

    Savills anticipates a rising tenant turnover rate as struggling stores vacate prime locations. While landlords may swiftly fill these coveted units with new tenants, they might need to offer shorter leases or attractively lower rental incentives to maintain occupancy in less desirable spaces. As the region gears up for a rebound in tourism, Orchard Road’s malls are expected to benefit, with rental prices projected to rise.

    The silver lining in this retail narrative is the expectation that both Orchard Road and suburban mall rents could see an uptick of up to 2% by 2025, fueled by the ongoing recovery of tourist arrivals. As the tide of tourism begins to lift Singapore’s retail waters, it seems that for some, the return of shoppers may indeed feel like a breath of fresh air amidst the uncertainty.

    Questions & Answers

    What factors are influencing Singapore’s retail sector performance this year?
    Singapore’s retail sector is grappling with uncertainties stemming from Liberation Day tariffs, a reduction in non-oil domestic exports, and softening resident employment, which collectively dampen consumer spending power.

    How are suburban malls poised to perform compared to those in the Central Region?
    Suburban malls with good transport connectivity and a solid residential base may remain more resilient, whereas Central Region malls may struggle under pressure from declining spending capacity.

    What is the forecast for retail rents in Singapore for 2025?
    Retail rents in both Orchard Road and suburban malls are expected to increase by up to 2% in 2025, spurred by a resurgence in tourist arrivals.

  • Mixed results for Giordano International

    Mixed results for Giordano International

    Hong Kong casual-apparel brand Giordano International has reported a small increase in sales for last year – and a dip in profit. Group-wide sales reached HK$5.509 billion last year, up 1.8 per cent, with same-store sales down a marginal 0.1 per cent. Profit attributable to shareholders fell 4 per cent to $480 million.

    In a stock exchange filing, Giordano International said sales from physical stores achieved a 1.7 per cent growth rate, while online sales – through its own sites and third-party platforms, grew by 1.3 per cent. Wholesale sales to its franchisees grew by 2.6 per cent.

    By category, its best-performing sectors were childrenswear and womenswear, where sales for both rose by 6.9 per cent.

    By geographical market, Giordano International delivered a mixture of results:

    Mainland China: Business was affected by the Sino-US trade dispute and stock-market volatility, which negatively impacted on domestic retail sales. Comp-store sales slipped by 0.9 per cent.

    Hong Kong and Macau: “Well-executed marketing programs, smart promotional activities and stringent cost control all helped achieve double-digit growth amidst complex macroeconomic conditions,” the company reported. “This market experienced a difficult retail landscape caused by an economic slowdown since the third quarter of the year. Severe typhoons and an abnormally warm winter also adversely affected its sales.”

    Taiwan: Sales here rebounded to allow an operating profit increase of 34.9 per cent in the first half of last year, however the full-year change was a mere 2 per cent, due to the uncertainty created by the Sino-US trade dispute.

    Vietnam: Giordano bought out its third-party retail operation in Vietnam and after improved sales and cost controls turned the business around. The market has grown to account for 5.6 per cent of Giordano international’s regional sales and operating profit rose.

    Thailand: Operating profit from Thailand grew by 11.1 per cent, thanks to stable sales growth and an improvement in gross-profit margin.

    Indonesia: In Southeast Asia, Indonesia stood out with a comp-store sales growth of 7 per cent for both Giordano and non-Giordano brands, and operating profit increased by 16 per cent.

    Singapore: Operating profit decreased by 6 per cent as the business was adversely affected by an overall stagnant economy and lower tourist traffic.

    Middle East: With consumers adapting to the newly introduced Value-Added Tax and changes in economic policies, comp-store sales fell by 7.3 per cent in the first quarter of last year. However, in the early weeks of this year, the company saw growth in comp-store sales of 4 per cent, prompting management to conclude that consumers have now adjusted to the tax changes and the retail industry there has stabilised.

    South Korea:  Net profit here increased by 6.7 per cent, attributable to better cost control, closure of non-performing stores and enhanced gross margin. Wholesale sales to South Korea increased by 10.5 per cent.

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