The outlook for Singapore’s retail property market by the end of the year may be dampened due to weaker-than-expected consumer spending. According to Alan Cheong, executive director of research and consultancy at Savills Singapore, the y-o-y change in the monthly retail sales index (excluding motor vehicles) and food and beverage (F&B) sales index have mostly been negative throughout the year, indicating relatively low consumer spending.
Cheong predicts that retail properties in the prime Orchard Road submarket can expect a 2% increase in rents for the whole year. However, this forecast falls short of the initial prediction by Savills at the beginning of the year, which expected a 3% to 5% climb in prime Orchard Road rents.
In line with his initial rental forecast, Cheong expects suburban retail rents to remain flat until the end of the year. Recent research jointly published by DBS and Singapore Management University (SMU) shows that consumer concerns over inflation have mostly eased in recent quarters, with headline inflation expectations remaining at 3.8% from June to September.
The research, led by SMU’s Sim Kee Boon Institute for Financial Economics (SKBI), also notes that most Singaporeans who expect inflation to remain stable in the coming quarters attribute it to the global economic slowdown, high interest rates, and the potential easing of supply chain disruptions.
In October, the Singapore Department of Statistics reported a 0.3% y-o-y increase in retail sales (excluding motor vehicles), reversing the 1.5% y-o-y decline in September. Cheong states that a more positive situation for the retail market would be if consumer spending kept pace with inflation, but its relatively low level poses financial challenges for businesses in the industry.
While Singapore hosted a packed calendar of headline concerts, conferences, and exhibitions this year, CBRE’s research, published last month, notes that the impact on retail spending and rental rates has been limited. The footfall generated by these events had a nuanced effect on surrounding malls, with concerts by international stars like Taylor Swift, Blackpink, Coldplay, and Westlife attracting over half of the 500,000 attendees who were foreigners and contributing between $350 million to $450 million in tourism receipts.
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However, according to CBRE Research, other MICE events, including the Formula One Grand Prix, World Congress of Dermatology, The Meetings Show Asia Pacific, NRF 2024, and ART SG, did not have a comparable impact on retail activity. Business event attendees tend to stay exclusively at the event venue, and even the F1 race, which generates an annual average of $125 million in tourist receipts, had little effect on foot traffic in tourist-centric areas like Orchard Road.
Sulian Tan-Wijaya, executive director of retail and lifestyle at Savills Singapore, notes that Singapore’s status as a regional hub attracted many noteworthy new-to-market brands this year, such as KSisters, The Pace, Brands for Less, and Hoka. She also observed the evolution of new wellness concepts and restaurants offering entertainment, which supported demand for retail spaces and rents.
Despite the new entrants, all prime shopping malls along Orchard Road maintained high occupancy rates this year, reflecting strong confidence in the retail market according to Cheong. Tan-Wijaya expects this trend to continue as new-to-market brands enter the region in 2025, particularly in central Singapore.
The limited supply of new retail spaces in the coming year may give retail landlords more flexibility to implement positive rental adjustments. They may also strategize and position their malls to remain relevant to both locals and tourists’ rapidly evolving consumption patterns. Cheong also predicts that more retailers will optimize their real estate strategies by right-sizing their spaces, establishing additional kiosks, closing under-performing branches, or shifting cooking operations to central kitchens.
He adds that there is strong momentum in the entry of new-to-market F&B brands into Singapore, and this trend is expected to continue in the first half of 2025. Tan-Wijaya also anticipates the emergence of new wellness concepts and restaurants offering entertainment, which will enhance Singapore’s dining scene.