SINGAPORE: The Singapore food and beverage (F&B) industry is experiencing a wave of closures, with more than 200 businesses shutting down each month.
This rate is higher than the average of 170 closures recorded during the pandemic.
According to a recent report by consultancy Knight Frank, 2,645 F&B businesses ceased operations in the first nine months of 2024, averaging 274 closures monthly.
This is a 19.7% increase compared to the entire year of 2023, which saw an average of 229 monthly closures.
Ethan Hsu, Knight Frank’s head of retail, explained that the current retail landscape is “very Darwinian,” meaning only the strongest businesses are likely to survive, The Business Times reports.
He said, “What is more worrying is the trend that F&B cessations 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 were 170 when movement restrictions crippled dining out.”
He noted that many local F&B operators are being pushed to innovate or consolidate to keep their businesses running sustainably.
The entry of new competitors is intensifying the pressure on existing F&B businesses.
Recently, several Chinese brands, including Chamoon Hot Pot and Bingxue, a well-known ice cream and tea chain, have launched in Singapore.
Chagee, a Chinese beverage brand, made a comeback to Singapore in August, following its departure in January earlier this year.
However, Knight Frank noted that while competition in the F&B sector is intensifying, overall retail sales seem to be stabilising. Despite the rise in visitor numbers, tourism spending per person in Singapore may be decreasing.
Knight Frank reported a slight increase in total retail sales (excluding motor vehicles), which slightly rose from S$3.3 billion in June to S$3.4 billion in July and S$3.5 billion in August.
Despite the increase in sales, tourism spending per person in Singapore appears to be declining, even as the number of visitors rises.
Singapore welcomed 12.6 million visitors in the first nine months of 2024, with peak numbers in July and August. Chinese visitor arrivals hit record highs during these months, with nearly 412,950 Chinese tourists arriving in July and about 403,140 in August, higher than the highs recorded in 2019.
However, this rise in visitors has not eased the financial strain many retailers are under due to rising operational costs.
Knight Frank pointed out that “not all is well in the retail space.”
Although visitor numbers are back to pre-pandemic levels, with Singapore remaining appealing to middle-class and wealthy visitors from Southeast Asia and beyond, challenges remain in the retail sector.
Knight Frank added, “Rental growth has started to ease and flatline as the high-cost environment takes its toll on many retailers and eateries.”
In the third quarter, average gross rents for prime retail spaces across Singapore remained largely steady from the previous quarter at S$27.40 per square foot per month (psf pm), showing a slight 0.1% increase.
However, retail rents are still 2.7% higher than last year’s period.
In the City Fringe micromarket, prime retail rents rose 0.4% to S$23.80 per square foot. Rents along Orchard Road increased by 0.2% to S$30.70 psf pm, while suburban rents dropped by 0.5% to S$26.40 psf pm on a quarterly basis.
Looking ahead, Knight Frank expects prime retail rents to grow between 2% and 4% by the end of 2024. /TISG
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