Consumer spending has not been as strong as expected, which is likely to have a dampening effect on rental forecasts for the retail property market in Singapore by the end of this 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 been negative throughout this year, indicating weaker consumer spending.
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Cheong predicts that prime retail properties in the Orchard Road area may see a 2% increase in rents by the end of the year, falling short of the initial forecast of 3% to 5% growth at the beginning of the year. Meanwhile, suburban retail rents are expected to remain flat, in line with the initial forecast for this segment.
Research jointly published by DBS and Singapore Management University (SMU) shows that consumer concerns over higher inflation have mostly eased in recent quarters. The headline inflation expectations among Singaporeans remained at 3.8% between June and September. The research, led by SMU’s Sim Kee Boon Institute for Financial Economics, also found that many expect inflation to stabilize in the coming quarters due to the global economic slowdown, high interest rates, and potential easing of supply chain disruptions.
The latest consumer spending data published by the Singapore Department of Statistics revealed a 0.3% year-on-year increase in retail sales (excluding motor vehicles) in October, reversing the 1.5% decline in September. Cheong notes that a more positive scenario for the retail market would be if consumer spending kept pace with inflation, but the fact that it has been relatively low poses financial challenges for businesses in the industry.
Despite a busy schedule of headline concerts, conferences, and exhibitions, retail spending and rental rates in Singapore have not seen significant support. CBRE’s research, released last month, showed that while these events led to higher foot traffic in nearby malls, the impact was mixed. 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 (meetings, incentives, conferences, and exhibitions) events did not have a similar effect on retail activity.
In Singapore, leisure and business events, including the Formula One Grand Prix, the 25th World Congress of Dermatology, and the NRF 2024 and ART SG events, were hosted. According to CBRE, business event attendees tend to stay exclusively at the event venue, while the F1 race, one of Singapore’s top international events, did not significantly boost foot traffic in tourist-centric areas such as Orchard Road.
However, Sulian Tan-Wijaya, executive director of retail and lifestyle at Savills Singapore, notes that Singapore’s position as a regional hub has continued to attract new-to-market brands. She mentions some notable retail stores that opened this year, including KSisters, The Pace, Brands for Less, Hoka, Rekoop, and Hideaway. She also observes the emergence of new F&B concepts, such as Sushi Samba, Blue Bottle, Grey Box, Puzzle Coffee, Centre of the Universe, and Rasa, which will open in December. These new entrants have also boosted demand for retail spaces and supported rental growth, especially in central Singapore.
Cheong also notes that all prime shopping malls along Orchard Road had high occupancy rates this year, as retail businesses had strong confidence in the retail market. He adds that Singapore continues to be a desirable destination for new-to-market brands entering the region, which includes retail, F&B, and lifestyle concepts. Tan-Wijaya predicts the emergence of new wellness concepts and restaurants that offer entertainment, which will enhance the vibrancy of Singapore’s dining scene.
In the coming year, retail landlords may have more flexibility 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, according to Cheong. He also expects retailers to optimize their real estate strategies, which may include right-sizing their spaces, establishing additional kiosks, closing under-performing branches, or shifting cooking operations to central kitchens. Cheong anticipates strong momentum in the entry of new-to-market F&B brands into Singapore, which will continue through at least the first half of 2025.