Rental growth in retail moderates below expectations from weak spending
According to research study jointly published by DBS and Singapore Management University (SMU), customer concerns over higher-than-expected inflation have primarily moderated in latest quarters. In Between June and September, Singaporean customers’ headline inflation assumptions continued to be at 3.8%.
“Some notable stores that opened in Singapore this year include KSisters, The Speed, Brands for Less and Hoka. The wellness industry is additionally evolving with new concepts like Rekoop and Hideaway,” she claims.
In a similar way, he expects that even more retailers will take the chance next year to optimize their realty techniques. This may consist of right-sizing their spaces, setting up additional booths, closing up under-performing branches, or shifting cooking operations to central kitchens.
She adds that several new F&B principles were also introduced, including Sushi Samba and coffee chains like Blue Bottle, Grey Box and Puzzle Coffee. New dining establishment ideas with entertainment, like Centre of the Universe, just started in the CBD area, while another brand-new player, Rasa, is set to open in December, additionally in the CBD.
Tan-Wijaya likewise sees the development of new wellness concepts and restaurants giving entertainment, that are expected to improve the vibrancy of Singapore’s restaurant scene.
Alan Cheong, executive manager of research and consultancy at Savills Singapore, says consumer spending in 2024 has actually been relatively 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 until now been primarily negative all throughout most of this year.
Cheong projections that retail industry properties in the prime Orchard Road submarket can see a 2% increase in rents within the full year. This projection drops marginally except expectations at the beginning of this year when Savills expected prime Orchard Road rents to climb up by 3% to 5%.
Concerts by international headliners were a major emphasize this year, 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 participants at Taylor Swift and Coldplay concerts were foreigners, adding in between $350 million and $450 million in tourism receipts.
Still, Sulian Tan-Wijaya, executive director of retail and lifestyle at Savills Singapore, says Singapore’s premier status as a regional center remained to attract noteworthy new-to-market brands.
Singapore also held numerous recreation 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.
While performances normally drive higher foot traffic to close-by malls including Kallang Wave Mall and Leisure Park Kallang– both situated close to the National Stadium and Singapore Indoor Stadium– various other MICE (meetings, incentives, conferences, and shows) activities have not had a similar impact on retail activity, observes CBRE Research.
Meanwhile, customer spending data released by the Singapore Department of Statistics earlier this month share that retail sales (excluding automobile) improved 0.3% y-o-y in October, turning around the 1.5% y-o-y decrease recorded in September.
“There is solid momentum in the access of new-to-market F&B brand names right into Singapore, and this pattern is expected to continue with at least the very first fifty percent of 2025,” claims Cheong.
The analysis, led by SMU’s Sim Kee Boon Institute for Financial Economics (SKBI), also found that many Singaporeans who anticipate inflation to secure in the coming quarters attribute this to the international financial downturn, high rates of interest and the potential easing of supply chain disturbances.
Regardless of a stuffed calendar of heading concerts, meetings and exhibitions in Singapore this year, retail spending and rental rates saw minimal support. CBRE’s research study, released late last month, highlighted that the footfall generated by these occasions had a nuanced effect on bordering malls.
Weaker-than-expected customer spending is set to dampen leasing projections for Singapore’s retail property industry by the end of the year.
Nonetheless, Cheong expects rural retail store rental payments to stay standard through completion of the year, which is in line with his first rental forecast for this section.
“Singapore remains an attractive destination for new-to-market brands going into the area, spanning retail, F&B, and some other lifestyle concepts,” states Savills’ Tan-Wijaya. She adds that these brand-new participants have boosted need for retail areas and supported rental development, especially in main Singapore.
Retail landlords may have much more adaptability next year to apply positive rental modifications, as the source of new retail areas becomes much more limited. “This will certainly permit them to strategise and position their malls to continue to be relevant in the rapidly developing usage patterns of both citizens and tourists,” says Savills’ Cheong.
CBRE monitored that business event participants tend to remain exclusively at the event venue. Even the F1 race, among Singapore’s most prominent worldwide events, observed reduced tourist foot traffic in nearby shopping malls prior to and during the race weekend. Whilst the competition produces a yearly usual of $125 million in traveler receipts, it has not significantly raised foot traffic in tourist-centric locations like Orchard Street.
Cheong states a more favorable result for the retail industry would certainly be a scenario where customer spending is keeping pace with inflation. “Nevertheless, the fact that it has been fairly low indicates that it might lead to financial challenges to businesses in the industry”.
Consequently, all the prime shopping malls along Orchard Street delighted in relatively high occupancy rates this year, as retail businesses have solid confidence in the retail industry, claims Savills’ Cheong.
