Singapore’s retail property market is facing some challenges as consumer spending has not been as strong as predicted, according to Alan Cheong, Executive Director of Research and Consultancy at Savills Singapore. He notes that the year-on-year change in the monthly retail sales index (excluding motor vehicles) and food and beverage (F&B) sales index has mostly been negative this year.
Cheong expects prime Orchard Road retail properties to see a 2% increase in rents by the end of the year, slightly below initial expectations of 3% to 5%. Suburban retail rents are expected to remain flat, in line with earlier forecasts.
Consumer concerns about inflation have moderated in recent months, according to research jointly published by DBS and Singapore Management University (SMU). However, consumer spending data from the Singapore Department of Statistics shows a 0.3% year-on-year increase in October, after a decline in September.
Cheong believes that a positive outlook would be one where consumer spending keeps pace with inflation, which is currently not the case. He cautions that this could pose financial challenges for businesses in the industry.
Despite a busy schedule of headline concerts, conferences, and exhibitions in Singapore this year, retail spending and rental rates were not significantly impacted. CBRE’s research showed that while concerts by international stars drew large crowds to nearby malls, other events did not have the same effect. Business events tend to keep attendees within the event venue, while the F1 race did not significantly boost foot traffic in tourist areas like Orchard Road.
However, Sulian Tan-Wijaya, Executive Director of Retail and Lifestyle at Savills Singapore, remains optimistic about Singapore as a regional hub for new-to-market brands. She notes that many new F&B and retail concepts have opened this year, and that the wellness sector is also evolving with new concepts like Rekoop and Hideaway.
All the prime shopping malls along Orchard Road have enjoyed high occupancy rates this year, says Savills’ Cheong, due to strong confidence in the retail market. Tan-Wijaya adds that new-to-market brands have helped support demand for retail spaces and rents in central Singapore.
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With limited supply of new retail spaces next year, landlords may have more flexibility in implementing positive rental adjustments. Savills’ Cheong expects more retailers to optimize their real estate strategies next year, which could include right-sizing their spaces, closing under-performing branches, or shifting cooking operations to central kitchens.
Cheong also sees strong momentum in the entry of new-to-market F&B brands into Singapore, which is expected to continue in the first half of 2025.