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MARKET
OVERVIEW
SINGAPORE MARKET
According to Singapore’s Ministry of
Trade and Industry, the Singapore
economy grew by 2.9% yoy in the
second quarter of 2017
(1)
, faster than
the 2.5% growth in the first quarter
of 2017, owing to the robust growth
from the manufacturing sector and
improving outlook of the global
economy. For 2017, the country’s
economy is expected to grow by
2.0% to 3.0%
(1)
, a revision from the
initial forecast of 1.0% to 3.0%.
Singapore Tourism Market
Growth in international visitor
arrivals remains modest with a
4.5% yoy increase for the first half
of 2017, and the increase was
largely supported by growth from
Singapore’s traditional markets
like China and India
(2)
. For the first
quarter of 2017, the tourism sector
recorded growth in visitor arrivals
and tourism receipts of 4% and 15%
respectively
(3)
. Notably, there has
been strong arrivals from China’s
Tier 1 and 2 cities due to increased
flight connectivity and marketing
efforts by Singapore Tourism Board
(STB). From June 2015, mainland
Chinese visitors are extended a
multi-journey visa for a maximum of
10 years, making it more convenient
for return trips to Singapore
(4)
. The
resurgence in mainland Chinese
visitorship was also attributed
to STB’s partnerships with digital
channels and online travel review
websites to reach out to the
Chinese consumers through their
unique digital ecosystem
(5)
. Likewise,
STB is also focusing its efforts on
strategic industry partnerships to
reach out to the Indian Tier 1 and
2 markets
(5)
.
To boost tourism, STB has also
partnered with local aviation
industry bodies
(6)
, as well as
partnerships for themed events
and activities
(7)
. The government
has also allocated S$700 million
as a third tranche of the Tourism
Development Fund for 2016 to
2020. Higher air passenger traffic
is expected when Changi Airport
Terminal 4 opens in the second half
of 2017
(8)
.
Singapore Retail Demand, Supply
and Outlook
Orchard Road is the most popular
free-access tourist destination in
Singapore
(9)
, and the renowned
shopping belt houses a concentration
of the top 10 global luxury brands
(10)
.
With one of the highest GDP per
capita in the world
(11)
, Singapore
remains an attractive market for
international mid-tier to luxury retail
brands. In 2016, Singapore ranked
behind Hong Kong and Japan in
Asia, with 46 new retail entrants, and
ranked fifth internationally in CBRE’s
global city rankings of international
retailer presence
(12)
. According to the
Urban Redevelopment Authority, as
at the end of the second quarter of
2017, islandwide public and private
retail pipeline is approximately
6.0 million sq ft till 2021
(13)
, with most
supply in the fringe and suburban
areas
(14)
. Supply in the Orchard area
remains limited with no visible pipeline
from 2017. Consumer sentiments
remain modest with the retail sales
index in Singapore (excluding motor
vehicle sales) rising 4.0% in June
2017
(15)
. Due to challenges in the
retail landscape, the average prime
Orchard Road retail rents have been
on a downtrend to S$31.30 psfpm
in the second quarter of 2017, while
rental outlook for the rest of 2017
and into 2018 is muted
(16)
.
Singapore Office Supply and Outlook
For the office sector, average rents
for Grade A and B space in the
second quarter of 2017 stabilised
to S$8.95 psfpm and S$7.25 psfpm
respectively, following eight quarters
of consecutive decline. However,
the rents registered declines of 5%
on a yoy basis. As at the end of the
second quarter of 2017, islandwide
public and private office pipeline
is approximately 7.3 million sq ft till
2021
(13)
. A more active leasing market
has improved the pre-commitment
levels for occupancy, and most of
the leasing activity and interest was
concentrated on developments in the
Core CBD
(16)
. However, rents outside
the Core CBD continue to come
under downward pressure on the
back of competition for tenants to
backfill space vacated by occupiers
upgrading to newer and better
premises in the CBD
(17)
.
AUSTRALIA MARKET
The Australian economy is expected
to strengthen gradually, as the
transition of the economy from its
reliance on the resource sector
gains traction. Low interest rates
are also lending support to the
transitioning economy. The central
bank has recently maintained its
interest rates
(18)
to manage the
country’s economic adjustment.
Gross domestic product is expected
to grow by 2.5% to 3.5% for the year
to December 2017. For the quarter
ended March 2017, the Australian
economy recorded a 1.7% yoy
growth on a seasonally-adjusted
volume basis
(18)
. While retail sales
inched up and employment data
improved, the current outlook for
consumption remains subdued
owing to slow growth in wages
and household debt
(18)
. For the 12
months to June 2017, retail sales
in South Australia recorded a 4.2%
yoy growth while Western Australia
recorded a 0.4% yoy growth in
seasonally adjusted terms
(19)
. In
the retail scene, Australia is likely
to continue to attract international
brand entrants in 2017 owing
to favourable macroeconomic
conditions, population and
consumption growth, as well as low
international brand penetration
of 28%
(20)
. Mid-range fashion and
specialist clothing brands are
expected to increasingly contribute
to brand entry over the next five
years, and they tend to focus on
CBD locations given their broad
target market
(20)
.
Adelaide Retail Market
In South Australia, retail sales have
seen a sustained trend of above
national average growth
(19)
, while rent
growth in the CBD remained stable
in the second quarter of 2017
(21)
.
International brands such as Adidas,
Levi’s and Lululemon Athletica have
been securing flagship stores along
Rundle Mall recently
(22)
. Clothing and
footwear remains the key tenant type
in Rundle Mall, accounting for nearly
40% of the tenants in the precinct
(22)
.
OPERATIONS REVIEW
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