Recovery in sight for Singapore’s retail sector
Singapore’s retail market was impacted during the pandemic. How does the future of retail look like now as we move into an endemic COVID-19?
With the vaccination rate climbing above 80%, and Singapore has already begun transiting to living with endemic COVID-19, there are great expectations that the re-opening of borders will invigorate the city-state’s travel industry and nudge the retail property market to recovery.
Singapore’s roadmap to living with an endemic COVID-19
Singapore’s Multi-Ministry Taskforce on COVID-19 envisaged the roadmap to an endemic COVID-19 situation, incorporating vaccination, testing and social responsibility. Booster shots may be required in a multi-year vaccination programme to safeguard the population from mutant viral strains,. Testing will be used to ensure that large scale events can proceed safely, reducing transmission. Good hygiene will continue to be encouraged, along with instructions to stay at home if unwell. A new normal might include a less burdened healthcare system, doing away with mass contact tracing, focusing on infection outcomes, and potentially lifting all social and workplace restrictions and leisure travel.
Domestic spending recovers to pre-COVID-19 levels
Figure 1: Retail Indicators (Chained Volume), Seasonally Adjusted from 2018
During the Circuit Breaker in 2Q20, borders were heavily restricted, residents were encouraged to stay at home, and physical stores were closed for most of April and the whole of May. Consequently, the retail sales index (excluding motor vehicles) in chained-volume terms in 2Q20 plummeted by 28.1% q-o-q. However, when restrictions were eased in June, retail and food and beverage (F&B) sales surged on a m-o-m basis, denoting a strong return and healthy domestic demand for dining-in and shopping.
Post Circuit Breaker, domestic retail spending recovered significantly to near pre-COVID-19 levels. The lack of tourist spending due to border controls made up the remaining difference. It is heartening to note that this is the case for discretionary shopping items such as jewellery, watches, apparel and footwear as well.
As for F&B, demand is still a fair bit lower than pre-COVID-19 levels due to group size limits and the suspension of dining-in to combat the spread of the highly infectious Delta variant. Demand will improve in tandem with the easing of restrictions as Singapore advances in its journey to an endemic COVID-19 situation.
New entrants and expansion despite pandemic
Singapore’s retail property market took a hit during the pandemic, recording rising vacancies and falling rents. However, a continuation of new entries and expansions underscored retailers and operators in Singapore as a shopping haven. Joy Luck Teahouse opened its debut Singapore store at ION Orchard in 3Q20, and Eggslut confirmed the opening of its first Southeast Asian store at Scotts Square later this year. Likewise, Marks and Spencer is expanding to 313@Somerset in 3Q21, while Swedish furniture store IKEA also opened its first small concept store in South East Asia at JEM in April 2021.
As Singapore reopens its borders progressively, we expect international retailers to continue viewing the city-state as a shopping destination in Asia and taking up retail spaces as tourism slowly climbs back. Healthy domestic consumption, coupled with the inevitable reopening of Singapore, will be promising for the future of retail.