Rental forecasts for Singapore’s retail property market may be dampened by weaker-than-expected consumer spending towards the end of the year, according to Alan Cheong, executive director of research and consultancy at Savills Singapore. He points out that the year-on-year change in the monthly retail sales index (excluding motor vehicles) and food and beverage (F&B) sales index has been mostly negative throughout most of 2024. As a result, Cheong predicts that retail properties in the prime Orchard Road submarket may only see a 2% increase in rents for the full year, falling short of initial expectations of 3% to 5% growth.
However, Cheong expects suburban retail rents to remain flat for the rest of the year, aligning with his original rental forecast for this segment. A joint research by DBS and Singapore Management University (SMU) found that consumer concerns over higher-than-expected inflation have moderated in recent quarters, with expectations remaining stable at 3.8% between June and September. This is attributed to the global economic slowdown, high interest rates, and potential easing of supply chain disruptions.
The Singapore Department of Statistics also reported a 0.3% year-on-year increase in retail sales (excluding motor vehicles) in October, after a decline of 1.5% in September. Cheong notes that while this is a positive sign, a more ideal outcome for the retail market would be if consumer spending could keep pace with inflation. However, the relatively low consumer spending levels could pose financial challenges for businesses in the industry.
Despite a busy schedule of headline concerts, conferences, and exhibitions in Singapore this year, retail spending and rental rates have not received significant support. Concerts by international stars such as Taylor Swift, Blackpink, Coldplay, and Westlife were a major highlight, with over half of the 500,000 attendees estimated to be foreigners contributing between $350 million and $450 million in tourism receipts. However, other MICE events have not had the same impact on retail activity. The Monetary Authority of Singapore estimates that only a small percentage of business event attendees venture outside of the event venue, even for renowned events like the Formula One Grand Prix.
Still, new-to-market brands and F&B concepts continue to enter Singapore, supported by a strong demand for retail spaces and rents. Savills executive director of retail and lifestyle Sulian Tan-Wijaya notes the emergence of wellness concepts and restaurants offering entertainment, which have enhanced the vibrancy of Singapore’s dining scene. With limited new retail spaces in the market, landlords may have more flexibility to adjust their rents next year to remain relevant in the evolving consumption patterns of both locals and tourists. Cheong also predicts that more retailers will optimize their real estate strategies next year, such as right-sizing their spaces or establishing additional kiosks, in light of the strong momentum in the entry of new-to-market F&B brands in Singapore.
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