Singapore’s retail property market may face a dampened rental outlook by the end of the year, with weaker-than-expected consumer spending. Alan Cheong, the executive director of research and consultancy at Savills Singapore, notes that consumer spending in 2024 has been relatively low, as evidenced by the negative y-o-y change in monthly retail sales index (excluding motor vehicles) and food and beverage (F&B) sales index throughout most of the year. As a result, Cheong expects only a 2% increase in retail rents in the prime Orchard Road submarket for the full year, falling short of the initial forecast of 3% to 5% growth by Savills at the beginning of the year. Similarly, suburban retail rents are expected to remain flat through the end of the year, matching the initial rental forecast for this segment.
According to research jointly published by DBS and Singapore Management University (SMU), consumer concerns over higher-than-expected inflation have mostly moderated in recent quarters. However, most Singaporeans who expect inflation to stabilize in the coming quarters attribute this to the global economic slowdown, high interest rates, and the potential easing of supply chain disruptions. On the other hand, consumer spending data published by the Singapore Department of Statistics earlier this month shows a slight increase of 0.3% y-o-y in October, following a decline of 1.5% y-o-y in September.
Cheong believes that a more positive outcome for the retail market would be a scenario where consumer spending is keeping pace with inflation. However, the fact that it has been relatively low poses financial challenges to businesses in the industry.
Despite a packed calendar of headline concerts, conferences, and exhibitions in Singapore this year, retail spending and rental rates saw limited support. While concerts by international stars like Taylor Swift, Blackpink, Coldplay, and Westlife drove higher foot traffic to nearby malls, other MICE events did not have a comparable impact on retail activity, observes CBRE Research. This includes the Formula One Grand Prix, the 25th World Congress of Dermatology, The Meetings Show Asia Pacific, NRF 2024, and ART SG. Even the F1 race, which generates an annual average of $125 million in tourist receipts, did not significantly boost foot traffic in tourist-centric areas like Orchard Road.
Sulian Tan-Wijaya, executive director of retail and lifestyle at Savills Singapore, notes that new-to-market brands and F&B concepts continued to enter Singapore this year, including KSisters, The Pace, Brands for Less, Hoka, and new wellness concepts like Rekoop and Hideaway. New entertainment and F&B concepts also opened, such as Sushi Samba, Blue Bottle, Grey Box, Puzzle Coffee, and Centre of the Universe. Tan-Wijaya adds that these new entrants have bolstered demand for retail spaces and supported rental growth, particularly in central Singapore.
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As a result, all prime shopping malls along Orchard Road have enjoyed high occupancy rates this year, highlighting the strong confidence in the retail market among retail businesses. Tan-Wijaya believes that the emergence of new wellness concepts and restaurants offering entertainment will enhance the vibrancy of Singapore’s dining scene. Moving forward, Cheong expects there to be more flexibility for retail landlords to implement positive rental adjustments next year as the supply of new retail spaces becomes more limited. This will allow them to strategize and position their malls to remain relevant in the rapidly evolving consumption patterns of both locals and tourists. He anticipates that more retailers will take the opportunity to optimize their real estate strategies and that the trend of new-to-market F&B brands entering Singapore will continue through at least the first half of 2025.