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Singapore F&B businesses survived Covid, only to be killed by rising costs and competition, with thousands closing
2,645 businesses ceased operations, with an average of 274 closures per month, says Knight Frank
Jessie Lim
Published Wed, Oct 16, 2024 · 01:10 PMF&B operators in Singapore are feeling the heat, with increasing competition forcing many out of business in a “very Darwinian retail environment”, said consultancy Knight Frank in its latest retail report.
In the first nine months of 2024, 2,645 F&B businesses ceased operations, with an average of 274 closures per month, it added.
This represents an increase of 19.7 per cent over the whole of 2023, which saw an average of 229 F&B business closures per month.
“What is more worrying is the trend that F&B cessations have increased to an average of over 200 per monthly last year and in the nine months of the current year, while in the pandemic year of 2020, the average monthly F&B closures was 170 when movement restrictions crippled dining out,” said Ethan Hsu, Knight Frank’s head of retail.
“Many homegrown F&B operators are forced to innovate or consolidate in order to keep business operations at sustainable levels.”
In the past few months, many new Chinese F&B brands have entered Singapore. They include Chamoon Hot Pot and Bingxue, a famous ice cream and tea chain. Chinese beverage brand Chagee also returned to Singapore in August after leaving in January this year.
Retail sales levelling off
Amid the increasing competition in the F&B sector, overall retail sales are showing signs of levelling off. Tourism expenditure per capita in Singapore might be declining despite rising visitor arrivals, Knight Frank said.Total retail sales (excluding motor vehicles) increased slightly from S$3.3 billion in June to S$3.4 billion and S$3.5 billion in July and August, Knight Frank said.
There were 12.6 million visitor arrivals in the first nine months of 2024, with the numbers peaking in July and August so far. Chinese visitor arrivals in July and August were the highest on record for the respective months.
Almost 412,950 Chinese tourists visited Singapore in July and close to 403,140 Chinese visitors were recorded in August, outpacing the previous highs in 2019.
Yet the improving visitor and Chinese arrivals were not able to overcome the prevailing challenges of high operating costs in the retail environment, Knight Frank said.
“Athough visitor arrivals progressively normalised to pre-pandemic numbers with Singapore being attractive to middle class and high-net-worth visitors from South-east Asia and beyond, not all is well in the retail space,” it added.
Rental growth easing
“Rental growth has started to ease and flatline as the high-cost environment takes its toll on many retailers and eateries,” the consultancy said.In Q3, average gross rent of prime retail spaces islandwide was relatively unchanged from the previous quarter at S$27.40 per square foot per month (psf pm), with a marginal 0.1 per cent quarterly gain. However, retail rents are still up 2.7 per cent year on year.
Prime retail rents in the City Fringe micromarket rose the most, increasing by 0.4 per cent to S$23.80 psf pm. Orchard Road rents inched up by 0.2 per cent to S$30.70 psf pm. Meanwhile, rents in the suburban micromarket contracted by 0.5 per cent on a quarterly basis to S$26.40 psf pm.
Knight Frank expects prime retail rents to end 2024 with between 2 per cent and 4 per cent growth.
