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Rental growth in retail moderates below expectations from weak spending
By Timothy Tay | December 25, 2024

Rental growth expectations for retail properties along Orchard Road will be tampered with due to weak consumer spending this year. (Picture: Albert Chua/The Edge Singapore)

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Weaker-than-expected consumer spending is set to dampen rental forecasts for Singapore’s retail property market by the end of the year.

Alan Cheong, executive director of research and consultancy at Savills Singapore, says consumer spending in 2024 has been relatively weak and points out that the y-o-y change in the monthly retail sales index (excluding motor vehicles) and food and beverage (F&B) sales index has so far been mostly negative throughout most of this year.

Cheong forecasts that retail properties in the prime Orchard Road submarket could see a 2% increase in rents over the full year. This forecast falls marginally short of expectations at the beginning of this year when Savills expected prime Orchard Road rents to climb by 3% to 5%.

Read also: Prime retail rents are steadily recovering but have yet to return to pre-pandemic levels: CBRE

However, Cheong expects suburban retail rents to remain flat through the end of the year, which is 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 moderated in recent quarters. Between June and September, Singaporean consumers’ headline inflation expectations 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 stabilise 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 reveal that retail sales (excluding motor vehicles) increased 0.3% y-o-y in October, reversing the 1.5% y-o-y decline recorded in September.

Cheong says a more positive outcome for the retail market would be a situation where consumer spending is keeping pace with inflation. “However, the fact that it has been relatively low means that it could pose financial challenges to businesses in the industry”.

Headline concerts and major events boosted tourist spending, but their effect on retail malls in tourist areas was mixed. (Picture: Albert Chua/The Edge Singapore)

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 late last month, highlighted that the footfall generated by these events had a nuanced effect on surrounding malls.

Read also: Orchard Road retail rents to grow 6% in 2023: Savills Singapore

Concerts by international stars were a major highlight this year, with renowned artists like Taylor Swift, Blackpink, Coldplay, and Westlife performing in Singapore. The Monetary Authority of Singapore estimates that 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 drive higher foot traffic to nearby malls such as Kallang Wave Mall and Leisure Park Kallang — both located close to the National Stadium and Singapore Indoor Stadium — other MICE (meetings, incentives, conferences, and exhibitions) events have not had a comparable impact on retail activity, observes 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.

Still, Sulian Tan-Wijaya, executive director of retail and lifestyle at Savills Singapore, says 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.

Read also: Retail rents end five consecutive quarters of declines with 0.3% q-o-q growth in 2Q2023

She adds that 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, just opened in the CBD area, while another new player, Rasa, is set to open in December, also in the CBD.

New-to-market retail brands, F&B concepts, and wellness experiences helped support demand for retail spaces and rents. (Picture: Albert Chua/The Edge Singapore)

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, says Savills’ Cheong.

“Singapore remains an attractive destination for new-to-market brands entering the region, spanning retail, F&B, and other lifestyle concepts,” says Savills’ Tan-Wijaya. She adds that 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.

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 strategise and position their malls to remain relevant in the rapidly evolving consumption patterns of both locals and tourists,” says Savills’ Cheong.

Similarly, he anticipates that more retailers will take the opportunity next year to optimise their real estate strategies. This could include 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.


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