Rental Growth Retail Moderates Below Expectations Weak Spending
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The rental forecast for Singapore’s retail property market by the end of the year is expected to be dampened due to weaker-than-expected consumer spending. According to Alan Cheong, the executive director of research and consultancy at Savills Singapore, consumer spending in 2024 has been relatively weak. The monthly retail sales index (excluding motor vehicles) and food and beverage (F&B) sales index have mostly recorded negative changes throughout the year.
Cheong predicts that retail properties in the prime Orchard Road submarket may see a marginal 2% increase in rents over the full year. This falls short of the initial expectations at the beginning of the year for a 3% to 5% climb in rents. The rental forecast for the suburban retail segment, however, remains unchanged.
A recent research jointly published by DBS and Singapore Management University (SMU) revealed that consumer concerns over higher-than-expected inflation have mostly moderated in recent quarters. The study, led by SMU’s Sim Kee Boon Institute for Financial Economics (SKBI), also found that most Singaporeans expect inflation to stabilize in the coming quarters due to the global economic slowdown, high interest rates, and potential easing of supply chain disruptions.
In October, the Singapore Department of Statistics reported that retail sales (excluding motor vehicles) increased by 0.3% year-on-year, reversing the 1.5% decline recorded in September. Cheong notes that a more positive outlook for the retail market would be a situation where consumer spending keeps pace with inflation. However, with relatively low consumer spending, businesses in the industry may face financial challenges.
Despite a packed calendar of headline concerts, conferences, and exhibitions in Singapore this year, retail spending and rental rates saw limited support. According to CBRE’s research, published last month, the footfall generated by these events had a mixed effect on surrounding malls.
Major concerts by international stars, such as Taylor Swift, Blackpink, Coldplay, and Westlife, were a highlight this year, with over half of the 500,000 attendees being foreigners contributing between $350 million and $450 million in tourism receipts, according to the Monetary Authority of Singapore. While these concerts typically drive foot traffic to nearby malls, other MICE (meetings, incentives, conferences, and exhibitions) events did not have a significant impact on retail activity, according to CBRE Research.
Singapore also hosted various leisure and business events, including the Formula One Grand Prix, the 25th World Congress of Dermatology, The Meetings Show Asia Pacific, NRF 2024, and ART SG. Business event attendees tend to stay exclusively at the event venue, even for events like the F1 race, which generates an average of $125 million in tourist receipts but has not significantly boosted foot traffic in tourist-centric areas like Orchard Road.
Sulian Tan-Wijaya, the executive director of retail and lifestyle at Savills Singapore, notes that despite the limited support from events, Singapore’s premier status as a regional hub has continued to attract new-to-market brands. Some notable retail stores that opened in Singapore this year include KSisters, The Pace, Brands for Less, and Hoka. The wellness sector is also evolving with new concepts like Rekoop and Hideaway.
Many new F&B concepts were also introduced, including Sushi Samba and coffee chains like Blue Bottle, Grey Box, and Puzzle Coffee. New restaurant concepts with entertainment, like Centre of the Universe, have opened in the CBD area, while another new player, Rasa, is set to open in December. These new-to-market retail brands, F&B concepts, and wellness experiences have helped support the demand for retail spaces and rents.
As a result, all prime shopping malls along Orchard Road enjoyed high occupancy rates this year, as retail businesses have strong confidence in the retail market, says Savills’ Cheong. He notes that Singapore continues to be an attractive destination for new-to-market brands entering the region, spanning retail, F&B, and other lifestyle concepts. These new entrants have bolstered demand for retail spaces and supported rental growth, particularly in central Singapore.
Tan-Wijaya also observes the emergence of new wellness concepts and restaurants offering entertainment, which are expected to enhance the vibrancy of Singapore’s dining scene. With the supply of new retail spaces becoming more limited, retail landlords may have more flexibility next year to implement positive rental adjustments. Cheong expects more retailers to take the opportunity to optimize their real estate strategies, such as right-sizing their spaces, establishing additional kiosks, closing under-performing branches, or shifting cooking operations to central kitchens.
“There is strong momentum in the entry of new-to-market F&B brands into Singapore, and this trend is expected to continue through at least the first half of 2025,” says Cheong.