The outlook for rental forecasts in Singapore’s retail property market at the end of the year is expected to be dampened by weaker-than-expected consumer spending. According to Alan Cheong, executive director of research and consultancy at Savills Singapore, consumer spending in 2024 has been relatively lackluster, with the monthly retail sales index (excluding motor vehicles) and food and beverage (F&B) sales index recording mostly negative year-on-year changes throughout the year.
Cheong predicts that rents for retail properties in the prime Orchard Road submarket may only see a 2% increase for the full year of 2025. This falls slightly below the initial forecast at the beginning of the year, where a 3% to 5% climb was expected by Savills. However, the forecast for suburban retail rents to remain flat for the rest of the year remains consistent with Cheong’s initial prediction for this segment.
A joint research report by DBS and Singapore Management University (SMU) reveals that consumer concerns over inflation have mostly moderated in recent quarters. From June to September, the inflation expectations of Singaporeans remained at 3.8%. The research, led by SMU’s Sim Kee Boon Institute for Financial Economics (SKBI), also found that those 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.
In October, the Department of Statistics in Singapore reported a 0.3% year-on-year increase in retail sales (excluding motor vehicles), reversing the 1.5% decline recorded in September. Cheong believes that a more promising scenario for the retail market would be one where consumer spending keeps pace with inflation, but the relatively low spending levels could pose financial challenges for businesses in the industry.
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While major events and headline concerts have boosted tourist spending, their impact on retail malls in tourist areas has been mixed. According to CBRE’s research, published in late October, the footfall generated by these events had varying effects on surrounding malls.
This year, Singapore saw a packed calendar of headline concerts, conferences, and exhibitions, but retail spending and rental rates have not seen significant support. The research by CBRE also noted that while these events typically drive higher foot traffic to nearby malls, such as Kallang Wave Mall and Leisure Park Kallang, other MICE (meetings, incentives, conferences, and exhibitions) events have not had a comparable impact on retail activity.
Tourists from overseas were a major highlight at these events, with popular 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, bringing in between $350 million to $450 million in tourism receipts. However, CBRE observes that business event attendees tend to stay exclusively at the event venue. Even the highly anticipated Formula One Grand Prix, which brings in an average of $125 million in tourist receipts annually, did not significantly boost foot traffic in tourist-centric areas like Orchard Road.
Despite this, Sulian Tan-Wijaya, executive director of retail and lifestyle at Savills Singapore, notes that Singapore’s premier status as a regional hub has continued to attract noteworthy new-to-market brands. The year saw the opening of several notable retail stores, including KSisters, The Pace, Brands for Less, and Hoka. The wellness sector is also evolving with new concepts like Rekoop and Hideaway, while the F&B industry introduced new concepts like Sushi Samba and coffee chains such as Blue Bottle, Grey Box, and Puzzle Coffee. The opening of new restaurants with entertainment elements, like Centre of the Universe in the CBD, and the upcoming Rasa, set to open in December, further adds to the vibrancy of Singapore’s dining scene.
Cheong notes that all prime shopping malls along Orchard Road have enjoyed high occupancy rates this year, as retail businesses have strong confidence in the retail market. “Singapore remains an attractive destination for new-to-market brands entering the region, spanning retail, F&B, and other lifestyle concepts,” says Tan-Wijaya. She adds that these new entrants have contributed to the demand for retail spaces and supported rental growth, especially in central Singapore.
Tan-Wijaya also observes the emergence of new wellness concepts and entertainment-focused restaurants, which are expected to enhance the vibrancy of Singapore’s dining scene.
Looking ahead, Singapore’s retail landlords may have more flexibility to implement positive rental adjustments next year as the supply of new retail spaces becomes limited. Cheong believes this will allow them to strategize and position their malls to remain relevant in the rapidly evolving consumption patterns of both locals and tourists. He also predicts that more retailers will take the opportunity to optimize their real estate strategies next year, which could include right-sizing their spaces, establishing additional kiosks, closing under-performing branches, or shifting cooking operations to central kitchens.
Cheong adds that there is a strong momentum in the entry of new-to-market F&B brands into Singapore, and this trend is expected to continue at least in the first half of 2025. With new-to-market retail brands, F&B concepts, and wellness experiences supporting the demand for retail spaces, the outlook for the retail market remains positive.