Unexpectedly weak consumer spending is likely to have a negative impact on rental projections for Singapore’s retail real estate market by the end of this year. According to Alan Cheong, executive director of research and consultancy at Savills Singapore, consumer spending in 2024 has been lackluster, with the monthly retail sales index (excluding motor vehicles) and food and beverage (F&B) sales index showing mostly negative year-on-year changes throughout most of the year. Cheong’s forecast for retail properties in the prime Orchard Road submarket is a 2% increase in rents for the full year, which falls slightly short of expectations at the beginning of the year, when a 3% to 5% increase was predicted by Savills.
However, Cheong believes that suburban retail rents will remain steady throughout the end of the year, in line with his initial rental forecast for this segment. Recent research jointly published by DBS and Singapore Management University (SMU) suggests that consumer concerns over higher-than-expected inflation have mostly diminished in recent quarters, with Singaporean consumers’ headline inflation expectations remaining 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 who expect inflation to stabilize in the coming quarters cite the global economic slowdown, high interest rates, and the potential easing of supply chain disruptions as the main reasons.
Meanwhile, consumer spending data released earlier this month by the Singapore Department of Statistics shows that retail sales (excluding motor vehicles) increased by 0.3% year-on-year in October, reversing the 1.5% decline in September. Cheong believes that a more positive outcome for the retail market would be a situation where consumer spending keeps pace with inflation. “However, the fact that it has been relatively low means that it could pose financial challenges to businesses in the industry.”
Despite a busy calendar of headline concerts, conferences, and exhibitions in Singapore this year, retail spending and rental rates saw limited support. According to CBRE’s research published late last month, the footfall generated by these events had a nuanced effect on surrounding malls. International concerts by renowned artists like Taylor Swift, Blackpink, Coldplay, and Westlife were a major highlight this year, with the Monetary Authority of Singapore estimating that over half a million attendees at Taylor Swift and Coldplay concerts were foreigners, contributing between $350 million and $450 million in tourism revenue. While concerts usually lead to higher foot traffic in nearby malls such as Kallang Wave Mall and Leisure Park Kallang, which are close to the National Stadium and Singapore Indoor Stadium, other MICE (meetings, incentives, conferences, and exhibitions) events have not had a comparable impact on retail activity, according to 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 people attending business events generally stay only at the event venue. Even the F1 race, one of Singapore’s most notable international events, saw reduced tourist foot traffic in nearby malls before and during the race weekend. While the race generates an average of $125 million in tourism receipts annually, it has not significantly boosted foot traffic in tourist-centric areas such as Orchard Road.
However, Sulian Tan-Wijaya, executive director of retail and lifestyle at Savills Singapore, believes that Singapore’s premier status as a regional hub continued to attract noteworthy new-to-market brands this year. “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. Additionally, new F&B concepts were introduced, including Sushi Samba and coffee chains like Blue Bottle, Grey Box, and Puzzle Coffee. New restaurant concepts that offer entertainment, such as Centre of the Universe, opened in the CBD area, while another new player, Rasa, will open in December, also in the CBD.
New-to-market retail brands, F&B concepts, and wellness experiences have helped bolster demand for retail spaces and rents. As a result, all prime shopping malls along Orchard Road had relatively high occupancy rates this year, as retail businesses have strong confidence in the retail market, according to Savills’ Cheong. “Singapore remains an attractive destination for new-to-market brands entering the region, spanning retail, F&B, and other lifestyle concepts,” adds Tan-Wijaya. She also notes the emergence of new wellness concepts and restaurants offering entertainment, which are expected to enhance the vibrancy of Singapore’s dining scene.
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Next 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 ever-changing consumption patterns of both locals and tourists,” says Cheong. Similarly, he expects more retailers to 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.