Rental growth in retail moderates below expectations from weak spending
Alan Cheong, executive director of research and consultancy at Savills Singapore, states consumer shopping in 2024 has 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 actually so far been mostly adverse throughout a lot of this year.
“Some notable stores that opened in Singapore this year consist of KSisters, The Speed, Brands for Less and Hoka. The wellness industry is likewise advancing with new ideas like Rekoop and Hideaway,” she says.
She adds that many new F&B concepts were also introduced, including Sushi Samba and coffee chains 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 brand-new player, Rasa, is set to open in December, also in the CBD.
Still, Sulian Tan-Wijaya, executive director of retail and lifestyle at Savills Singapore, states Singapore’s leading status as a regional hub continued to bring in significant new-to-market brand names.
Retail proprietors might have more adaptability next year to execute favorable rental modifications, as the supply of new retail rooms becomes much more limited. “This will certainly allow them to strategise and position their shopping centers to continue to be appropriate in the quickly developing usage patterns of both locals and vacationers,” states Savills’ Cheong.
Singapore also held numerous recreation and business occasions, including the Formula One Grand Prix, the 25th World Congress of Dermatology, The Meetings Show Asia Pacific, NRF 2024 and ART SG.
In spite of a stuffed calendar of heading concerts, conferences and events in Singapore this year, retail spending and rental rates saw minimal support. CBRE’s research, published late last month, highlighted that the footfall produced by these occasions had a nuanced impact on bordering shopping centers.
Weaker-than-expected consumer expenditures is readied to dampen leasing forecasts for Singapore’s retail real estate market by the end of the year.
CBRE observed that business occasion participants often tend to remain specifically at the event location. In fact, the F1 race, among Singapore’s most famous global events, viewed reduced visitor foot traffic in neighboring malls just before and during the race weekend. Whilst the competition produces a yearly average of $125 million in traveler receipts, it has not considerably increased foot traffic in tourist-centric areas like Orchard Road.
“There is solid momentum in the entrance of new-to-market F&B brands into Singapore, and this fad is anticipated to proceed with at least the first fifty percent of 2025,” says Cheong.
Cheong says a more positive end result for the retail market would be a situation where customer spending is equaling inflation. “Nonetheless, the truth that it has been reasonably low indicates that it might pose financial challenges to businesses in the market”.
Nevertheless, Cheong anticipates rural retail store rental payments to stay fixed through the end of the year, which is in line with his initial rental forecast for this segment.
Cheong projections that retail industry properties in the prime Orchard Road submarket could see a 2% increase in leas within the full year. This projection falls marginally short of expectations at the beginning of this year when Savills anticipated prime Orchard Road rents to climb by 3% to 5%.
“Singapore remains a desirable location for new-to-market brands going into the region, covering retail, F&B, and other lifestyle principles,” states Savills’ Tan-Wijaya. She adds that these new participants have actually boosted demand for retail rooms and sustained rental growth, specifically in central Singapore.
Concerts by global stars were a significant emphasize this year, with distinguished musicians like Taylor Swift, Blackpink, Coldplay, and Westlife performing in Singapore. The Monetary Authority of Singapore estimates that over fifty percent of the 500,000 participants at Taylor Swift and Coldplay concerts were foreigners, contributing between $350 million and $450 million in tourism invoices.
As a result, all the top shopping malls around Orchard Street enjoyed reasonably high occupancy prices this year, as retail businesses have solid confidence in the retail market, states Savills’ Cheong.
Tan-Wijaya also sees the development of new wellness approaches and restaurants offering leisure, that are anticipated to enhance the dynamics of Singapore’s food scene.
At the same time, consumer spending information published by the Singapore Department of Statistics earlier this month reveal that retail sales (omitting car) increased 0.3% y-o-y in October, turning around the 1.5% y-o-y decline reported in September.
According to research collectively released by DBS and Singapore Management University (SMU), consumer concerns over higher-than-expected inflation have mainly regulated in recent quarters. In Between June and September, Singaporean customers’ headline rising cost of living assumptions continued to be at 3.8%.
In a similar way, he prepares for that even more retailers will take the chance next year to optimise their realty approaches. This could possibly include right-sizing their spaces, setting up additional kiosks, shutting off under-performing branches, or changing cooking procedures to main kitchen areas.
While concerts commonly drive greater foot visitor traffic to nearby shopping malls like Kallang Wave Mall and Leisure Park Kallang– both situated close to the National Stadium and Singapore Indoor Arena– various other MICE (meetings, incentives, conferences, and shows) activities have not had an equivalent effect on retail activity, observes CBRE Research.
The research, led by SMU’s Sim Kee Boon Institute for Financial Economics (SKBI), even found that many Singaporeans that anticipate inflation to stabilise in the coming quarters associate this to the international economic stagnation, high rates of interest and the prospective easing of supply chain disruptions.