The consumer spending in Singapore has been weaker than expected, which is likely to dampen rental forecasts for the retail property market by the end of the year. According to Alan Cheong, executive director of research and consultancy at Savills Singapore, the monthly retail sales index (excluding motor vehicles) and food and beverage (F&B) sales index have mostly seen negative changes this year, indicating a slow market.
Cheong predicts that rents for retail properties in the prime Orchard Road submarket may only see a 2% increase by the end of the year, falling short of initial expectations of a 3% to 5% climb. However, his rental forecast for the suburban retail market remains unchanged and is expected to remain flat.
A recent joint research by DBS and Singapore Management University (SMU) reveals that consumer concerns over high inflation have started to ease in the past few quarters. The research also found that people who expect inflation to stabilize in the coming months attribute it to the global economic slowdown, high interest rates, and potential easing of supply chain disruptions.
Though retail sales (excluding motor vehicles) saw a 0.3% year-on-year increase in October, reversing the 1.5% decline recorded in September, Cheong believes a more desirable outcome would be if consumer spending kept pace with inflation. He also states that the current low spending rate could pose financial challenges to businesses in the industry.
Singapore’s urban environment is characterized by towering skyscrapers and state-of-the-art infrastructure. The city’s prime locations are dotted with luxurious condominiums that offer a perfect combination of comfort and convenience, making them a popular choice among both local inhabitants and expatriates. These modern living spaces boast a wide range of facilities, including swimming pools, gyms, and round-the-clock security services, elevating the overall living experience and making them highly desirable to potential tenants and buyers. Moreover, for investors, these top-notch amenities result in higher rental returns and appreciation in property values over time. Keep an eye out for New Condo Launches, as they continue to elevate the standard of living in Singapore’s ever-evolving urban landscape.
Despite high-profile concerts and events taking place in Singapore this year, they have not had a significant impact on retail sales and rental rates. CBRE’s research shows that while concerts by international stars such as Taylor Swift and Coldplay attracted many attendees, other MICE (meetings, incentives, conferences, and exhibitions) events did not generate the same foot traffic to nearby malls.
Though Singapore hosted various leisure and business events, including the Formula One Grand Prix and the 25th World Congress of Dermatology, CBRE observed that most business event attendees tend to stay at the event venue. Even the F1 race, which usually generates an average of $125 million in tourist receipts, did not result in a significant boost in foot traffic in popular tourist areas like Orchard Road.
Despite this, Sulian Tan-Wijaya, executive director of retail and lifestyle at Savills Singapore, says that Singapore’s status as a regional hub has continued to attract notable new-to-market brands. She mentions some new retail stores, such as KSisters, The Pace, and Brands for Less, and new F&B concepts like Sushi Samba and coffee chains like Blue Bottle, Grey Box, and Puzzle Coffee. She also points out the emergence of new wellness concepts and restaurants offering entertainment, which have helped boost demand for retail spaces and supported rental growth.
Next year, retail landlords may have more flexibility to adjust rental rates positively as the supply of new retail spaces becomes limited. Cheong suggests that this will allow them to strategize and keep their malls relevant in the ever-changing consumer patterns of both locals and tourists. He also believes that more retailers will take this opportunity to optimize their real estate strategies, which may include right-sizing their spaces, establishing additional kiosks, or closing underperforming branches.
Cheong predicts that the trend of new-to-market F&B brands entering Singapore will continue in the first half of 2025, which will further enhance the vibrancy of the dining scene. Overall, there is a strong momentum in the retail market, and with the support of new entrants and limited supply, this trend is expected to continue in the future.