Consumer spending in 2024 has been weaker than expected, which will likely result in lower 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, reports that the y-o-y change in the monthly retail sales index (excluding motor vehicles) and food and beverage (F&B) sales index has mostly been negative 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, falling short of the initial 3% to 5% expectations at the beginning of the year.
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However, Cheong expects suburban retail rents to remain flat through the end of the year, in line with his original rental forecast for this segment. According to research jointly published by DBS and the Singapore Management University (SMU), consumer concerns over higher-than-expected inflation have mostly moderated in recent quarters. The research also found that most Singaporeans expect inflation to stabilise in the coming quarters due to the global economic slowdown, high interest rates, and potential easing of supply chain disruptions.
Meanwhile, retail spending data from the Singapore Department of Statistics revealed a 0.3% y-o-y increase in retail sales (excluding motor vehicles) in October, reversing the 1.5% y-o-y decline in September. Cheong notes that consumer spending keeping pace with inflation would be a more positive outcome for the retail market. However, the fact that it has been relatively low means 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, according to research by CBRE. While concerts by international stars like Taylor Swift, Blackpink, Coldplay, and Westlife attracted over 500,000 attendees, contributing between $350 million and $450 million in tourism receipts, other MICE events had a nuanced effect on retail activity. Business event attendees tend to stay exclusively at the event venue, and even the Formula One Grand Prix, which generates an annual average of $125 million in tourist receipts, did not significantly boost foot traffic in Orchard Road.
However, Sulian Tan-Wijaya, executive director of retail and lifestyle at Savills Singapore, notes that Singapore’s status as a regional hub continues to attract noteworthy new-to-market brands. Notable new retail stores include KSisters, The Pace, Brands for Less, and Hoka, as well as new F&B concepts like 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. 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. As a result, all prime shopping malls along Orchard Road have enjoyed relatively high occupancy rates this year, as retail businesses have strong confidence in the retail market. Cheong adds that Singapore remains an attractive destination for new-to-market brands entering the region, spanning retail, F&B, and other lifestyle concepts.
Looking ahead, 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. Similarly, Cheong expects more retailers to take advantage of this opportunity to optimize their real estate strategies, including 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 in the first half of 2025,” says Cheong, adding that there is also expected to be an increase in the entry of new wellness concepts and restaurants offering entertainment. In conclusion, while weaker-than-expected consumer spending may dampen rental forecasts for Singapore’s retail property market this year, the entry of new-to-market brands and the emergence of new concepts may provide support for the overall market in the coming years.