Singapore retail sector to take a pounding as Brexit cripples tourist spending

Weak sterling may lure travellers to UK, not Singapore.

The future remains bleak for Singapore’s beleaguered retail sector, as analysts predict Brexit further dampening inbound tourist flow and their retail spending.

According to a report by JLL, the ramp up in rental correction and continued rise in vacancy rate reflects the sustained weakness in the retail sector.

“To maximise store portfolios, returns and operational efficiency amid falling consumer spending, labour constraints, high operating costs and competition from e-commerce, retailers have adopted the strategy of focusing on rechanneling funds and manpower towards profitable outlets, whilst consolidating loss-making and unprofitable outlets within Singapore,” noted Tay Huey Ying, Head of Research at JLL Singapore.

Tay further asserted that some players have succumbed to the tough operating environment and bowed out of the industry before lease expiry. Tay added has led to an increased incidence of pre-terminations, further exacerbating vacancy and downward pressure on rents.

Moreover, headwinds for the retail sector are expected to intensify as Brexit could further dampen the already fragile consumer sentiment, and impact retail spending. The depreciating pound could divert Singapore’s key inbound travellers. Tourists from China, India, Indonesia, and Malaysia may opt for the UK for sightseeing and shopping, instead of traveling to Asia, including Singapore.

In addition, Singapore might see fewer British travellers, who currently contribute about 3% of the total inbound tourists, as it will be dearer to travel to Singapore due to the weaker pound.

“A Brexit-induced tourism lull is expected to exacerbate the already-challenged retail trade and the impact is expected to be greatest on the performance of malls in the Orchard submarket, which relies heavily on tourist spending,” Tay added.