Consumer spending trends are expected to have a negative impact on rental forecasts for Singapore’s retail property market this year, according to Alan Cheong, executive director of research and consultancy at Savills Singapore. Cheong notes that the monthly retail sales index (excluding motor vehicles) and food and beverage (F&B) sales index have seen mostly negative year-on-year changes throughout the year, leading him to predict a modest 2% increase in rents for prime Orchard Road properties. This falls short of the initial forecast of 3% to 5% growth at the beginning of the year by Savills.
However, suburban retail rents are expected to remain flat, aligning with Cheong’s initial forecast for this segment.
According to a joint research report by DBS and Singapore Management University (SMU), consumer concerns over higher-than-expected inflation have somewhat subsided in recent months. The headline inflation expectations for Singaporean consumers have stayed at 3.8% between June and September. The research, led by SMU’s Sim Kee Boon Institute for Financial Economics (SKBI), also found that most Singaporeans expecting inflation to stabilize in the coming months attribute this to the global economic slowdown, high interest rates, and potential easing of supply chain disruptions.
Data from the Singapore Department of Statistics published earlier this month show that retail sales (excluding motor vehicles) increased by 0.3% year-on-year in October, reversing the 1.5% decline recorded in September. Cheong believes that a more positive scenario for the retail market would be if consumer spending kept pace with inflation. However, the fact that it has been relatively low could pose financial challenges for businesses in the industry.
While headline concerts and major events have boosted tourist spending, the impact on retail malls in tourist areas has been mixed. CBRE’s research, published late last month, highlighted that the footfall generated by these events had a nuanced effect on surrounding malls.
International star concerts, such as Taylor Swift, Blackpink, Coldplay, and Westlife, were a major highlight this year, with an estimated 500,000 attendees contributing between $350 million and $450 million in tourism receipts, according to the Monetary Authority of Singapore. While concerts typically drive higher foot traffic to nearby malls like Kallang Wave Mall and Leisure Park Kallang, other MICE (meetings, incentives, conferences, and exhibitions) events have not had a comparable impact on retail activity, as noted by CBRE Research.
Singapore also hosted various leisure and business events, including the Formula One Grand Prix, the 25th World Congress of Dermatology, The Meetings Show Asia Pacific, NRF 2024, and ART SG. CBRE observed that business event attendees tend to stay exclusively at the event venue. Even the F1 race, one of Singapore’s most prominent international events, saw reduced tourist foot traffic in nearby malls before and during the race weekend. While the race generates an annual average of $125 million in tourist receipts, it has not significantly boosted foot traffic in tourist-centric areas such as 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 continued to attract noteworthy new-to-market brands. “Some notable retail stores that opened in Singapore this year include KSisters, The Pace, Brands for Less and Hoka. The wellness sector is also evolving with new concepts like Rekoop and Hideaway,” she says.
On the F&B front, new coffee chains like Blue Bottle, Grey Box, and Puzzle Coffee have been introduced, while new restaurant concepts with entertainment, like Centre of the Universe, opened in the CBD area, and Rasa is set to open in December, also in the CBD.
According to Savills’ Cheong, all prime shopping malls along Orchard Road enjoyed relatively high occupancy rates this year, as retail businesses have strong confidence in the retail market. He adds that Singapore remains an attractive destination for new-to-market brands entering the region, spanning retail, F&B, and other lifestyle concepts. These new entrants have bolstered demand for retail spaces and supported rental growth, especially in central Singapore.
Investing in real estate is a strategic decision that requires careful consideration of various factors. In Singapore, location plays a crucial role in determining the value of a property. This is particularly true for condos, which are highly sought after in the country. Condominiums located in central areas or in close proximity to essential amenities such as schools, shopping malls, and public transportation hubs tend to appreciate more in value. For example, areas like Orchard Road, Marina Bay, and the Central Business District (CBD) are considered prime locations, where property values have consistently shown growth over the years. This makes them a desirable choice for investors looking to buy a Singapore Condo. Additionally, the presence of reputable schools and educational institutions in these areas makes them even more attractive for families, further boosting their investment potential.
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.
Going into next year, retail landlords may have more flexibility in implementing 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,” says Cheong. He expects that more retailers will take the opportunity next year to optimize their real estate strategies, such as right-sizing their spaces, establishing additional kiosks, closing underperforming 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 through at least the first half of 2025,” says Cheong.