Rental Growth Retail Moderates Below Expectations Weak Spending
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The rental outlook for Singapore’s retail property market at the end of the year is expected to be affected by weaker-than-expected consumer spending.
Alan Cheong, the executive director of research and consultancy at Savills Singapore, notes that consumer spending in 2024 has remained relatively low, with the monthly retail sales index (excluding motor vehicles) and food and beverage (F&B) sales index showing mostly negative changes throughout the year.
As a result, Cheong forecasts a 2% increase in rents for retail properties in the prime Orchard Road submarket for the full year. This prediction falls slightly below expectations at the beginning of the year, when Savills expected rents in Orchard Road to rise by 3% to 5%.
However, Cheong also predicts that suburban retail rents will remain flat until the end of the year, in line with his 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 eased in recent quarters. From June to September, the headline inflation expectations for Singaporean consumers remained at 3.8%.
The research, led by SMU’s Sim Kee Boon Institute for Financial Economics (SKBI), also found that 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.
Meanwhile, consumer spending data published by the Singapore Department of Statistics earlier this month reveals that retail sales (excluding motor vehicles) increased by 0.3% y-o-y in October, reversing the 1.5% y-o-y decline recorded in September.
Cheong notes that a more positive outcome for the retail market would be a situation where consumer spending keeps pace with inflation. “However, the fact that it remains relatively low means that it could pose 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. CBRE’s research, published in late November, highlighted that the footfall generated by these events had a nuanced effect on surrounding malls.
Major international concerts were a highlight this year, with renowned artists like Taylor Swift, Blackpink, Coldplay, and Westlife performing in Singapore. According to the Monetary Authority of Singapore, over half of the 500,000 attendees at Taylor Swift and Coldplay concerts were foreigners, contributing between $350 million and $450 million in tourism receipts.
While concerts typically bring in higher foot traffic to nearby malls such as Kallang Wave Mall and Leisure Park Kallang – both located near the National Stadium and the Singapore Indoor Stadium – other MICE (meetings, incentives, conferences, and exhibitions) events have not had a comparable 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.
CBRE observed that business event attendees tend to stay exclusively at the event venue. Even the F1 race, one of Singapore’s most prominent international events, saw reduced tourist foot traffic in nearby malls before and during the race weekend. While the race generates an annual average of $125 million in tourist receipts, it has not significantly boosted foot traffic in tourist-centric areas such as Orchard Road.
However, Sulian Tan-Wijaya, executive director of retail and lifestyle at Savills Singapore, says that Singapore’s premier status as a regional hub continued to attract noteworthy 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,” she says.
Tan-Wijaya also notes the emergence of new wellness concepts and restaurants offering entertainment, which are expected to enhance the vibrancy of Singapore’s dining scene.
As a result, all the prime shopping malls along Orchard Road enjoyed relatively high occupancy rates this year, as retail businesses have strong confidence in the retail market, according to Savills’ Cheong.
“Singapore remains an attractive destination for new-to-market brands entering the region, spanning retail, F&B, and other lifestyle concepts,” says Tan-Wijaya. She adds that these new entrants have bolstered demand for retail spaces and supported rental growth, particularly in central Singapore.
Retail landlords may have more flexibility next year to implement positive rental adjustments, 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,” says Savills’ Cheong.
Similarly, he expects more retailers to take the opportunity next year to optimize their real estate strategies. This could include right-sizing their spaces, establishing additional kiosks, closing underperforming 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.