SINGAPORE (EDGEPROP) - Savill Singapore projects retail rents to continue its growth momentum backed by an ongoing recovery in tourist arrivals. In a November research report, the consultancy estimates average rents on Orchard Road will see a full-year increase of 6% y-o-y for 2023. Meanwhile, suburban mall rents are anticipated to grow by 1% to 2% this year.

The full-year forecast comes on the back of a positive performance for the retail property market in 3Q2023. Rents of Orchard area malls tracked by Savills rose 1.3% q-o-q to $22.40 psf last quarter, while suburban malls saw an increase of 0.7% q-o-q to $14.60 psf across the same period.

The higher rents were supported by stronger tourist figures, which in turn prompted continued growth in retail and F&B sales. Visitor arrivals in Singapore rose to nearly 3.9 million in 3Q2023, compared to a quarterly average of 4.5 million between 2015 and 2019.

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Islandwide vacancy for retail space eased 0.3 percentage points q-o-q to 7.2% in 3Q2023. “Even though net demand for islandwide retail space turned negative in 3Q, the removal of 248,000 sq ft of retail space across the island softened the negative impact from the demand side,” Savills’ report states.

In terms of key trends, Savills highlights changes within the fitness and wellness industry to adapt to changing consumer needs, with new brands entering the market and more openings occurring on a smaller scale.

In addition, Savills notes there was some consolidation among the bigger fitness chains in central areas amid hybrid working arrangements. “In order to manage their costs and improve their revenue streams, businesses will start to right-size their operations or diversify their businesses,” the report states.

Heading into the new year Savills predicts tepid economic growth, coupled with heightened inflation and interest rates, to result in slower growth in retail rents in 2024. Nonetheless, ongoing recovery in tourism is expected to support rents in prime areas. “Retail rents on Orchard Road stand to benefit most from the strong tourist arrivals expected in 2024,” comments Alan Cheong, executive director, research and consultancy at Savills Singapore.

Sulian Tan-Wijaya, executive director, Savills retail and lifestyle, adds that central locations continue to see healthy demand from overseas retailers looking to open their first Singapore outlet.

The completion of rejuvenated retail projects such as Marina Square, Forum Mall and Harbourfront Centre is also expected to lift overall rental expectations in the Central Region. Savills is projecting Orchard retail rents to grow between 3% and 5% next year.

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On the other hand, suburban retail rents are anticipated to stay flat in 2024, as outbound travel and inflation dampen discretionary consumption spending in the housing heartlands.