Rental growth in retail moderates below expectations from weak spending
Singapore also hosted numerous leisure and business events, involving the Formula One Grand Prix, the 25th World Congress of Dermatology, The Meetings Show Asia Pacific, NRF 2024 and ART SG.
Retail property managers may have much more versatility next year to implement positive rental adjustments, as the supply of brand-new retail spaces comes to be more restricted. “This will certainly allow them to strategise and position their malls to continue to be pertinent in the quickly evolving usage patterns of both citizens and tourists,” says Savills’ Cheong.
According to research study collectively released by DBS and Singapore Management University (SMU), consumer concerns over higher-than-expected inflation have mostly moderated in latest quarters. Between June and September, Singaporean customers’ headline rising cost of living expectations remained at 3.8%.
Meanwhile, consumer spending data released by the Singapore Department of Statistics earlier this month disclose that retail sales (ruling out automobile) boosted 0.3% y-o-y in October, reversing the 1.5% y-o-y decline reported in September.
Weaker-than-expected consumer spending is set to dampen rental projections for Singapore’s retail property industry by the end of the year.
In a similar way, he expects that even more retailers will take the opportunity next year to optimise their real estate approaches. This could possibly consist of right-sizing their spaces, setting up additional booths, shutting off under-performing branches, or changing cooking operations to main cooking areas.
Shows by worldwide headliners were a significant emphasize this year, with popular artists like Taylor Swift, Blackpink, Coldplay, and Westlife performing in Singapore. The Monetary Authority of Singapore estimates that over fifty percent of the 500,000 attendees at Taylor Swift and Coldplay performances were foreigners, contributing in between $350 million and $450 million in tourism receipts.
“There is strong energy in the entry of new-to-market F&B brands into Singapore, and this fad is anticipated to continue via approximately the initial fifty percent of 2025,” states Cheong.
Tan-Wijaya likewise observes the development of brand-new wellness approaches and restaurants offering entertainment, that are anticipated to boost the vibrancy of Singapore’s restaurant scene.
The research study, led by SMU’s Sim Kee Boon Institute for Financial Economics (SKBI), also discovered that a lot of Singaporeans that anticipate rising cost of living to secure in the coming quarters associate this to the worldwide financial slowdown, high interest rates and the possible easing of supply chain disruptions.
However, Cheong anticipates country retail rents to remain flat via completion of the year, that is in line with his initial rental projection for this section.
While concerts generally drive higher foot visitor traffic to nearby malls including Kallang Wave Shopping Mall and Leisure Park Kallang– both situated close to the National Stadium and Singapore Indoor Stadium– various other MICE (meetings, incentives, conferences, and shows) events have actually not had a comparable effect on retail activity, observes CBRE Research.
Alan Cheong, executive supervisor of research and consultancy at Savills Singapore, states buyer spending in 2024 has been fairly weak and points out that the y-o-y change in the monthly retail sales index (excluding motor vehicles) and food and beverage (F&B) sales index has actually so far been primarily adverse throughout the majority of this year.
She includes that lots of new F&B principles were also introduced, including Sushi Samba and coffee groups like Blue Bottle, Grey Box and Puzzle Coffee. New dining establishment concepts with entertainment, like Centre of the Universe, just started in the CBD area, while an additional new player, Rasa, is entered open in December, additionally in the CBD.
“Some notable stores that opened in Singapore this year include KSisters, The Pace, Brands for Less and Hoka. The wellness industry is likewise progressing with new principles like Rekoop and Hideaway,” she says.
Cheong claims a more positive result for the retail market would be a scenario where consumer spending is keeping pace with inflation. “Nonetheless, the truth that it has actually been reasonably low indicates that it might pose financial challenges to businesses in the industry”.
Cheong forecasts that retail industry properties in the prime Orchard Road submarket might see a 2% boost in rents over the complete year. This projection falls partially short of expectations at the beginning of this year when Savills anticipated prime Orchard Road rental fees to climb by 3% to 5%.
Despite a jam-packed calendar of heading concerts, meetings and exhibitions in Singapore this year, retail spending and rental rates observed minimal support. CBRE’s research, published late last month, highlighted that the footfall generated by these events had a nuanced result on bordering malls.
“Singapore continues to be an attractive destination for new-to-market brand names entering the region, covering retail, F&B, and other lifestyle principles,” says Savills’ Tan-Wijaya. She adds that these new entrants have actually boosted demand for retail rooms and sustained rental growth, especially in main Singapore.
CBRE observed that business event guests tend to remain solely at the event venue. Even the F1 race, among Singapore’s most prominent global events, viewed reduced visitor foot traffic in close-by shopping malls prior to and in the course of the race weekend. Although the race generates an annual average of $125 million in tourist receipts, it has not considerably raised foot traffic in tourist-centric areas such as Orchard Street.
Therefore, all the top mall around Orchard Street took pleasure in relatively high occupancy rates this year, as retail businesses have strong confidence in the retail market, says Savills’ Cheong.
Still, Sulian Tan-Wijaya, executive supervisor of retail and lifestyle at Savills Singapore, states Singapore’s top condition as a local hub continued to draw in notable new-to-market brand names.
