Consumer spending in Singapore’s retail property market is expected to fall short of expectations by the end of the year, according to Alan Cheong of Savills Singapore. Cheong notes that the monthly retail sales index (excluding motor vehicles) and food and beverage (F&B) sales index have mostly seen negative year-on-year changes in 2024. As a result, Cheong predicts a 2% increase in rents for prime Orchard Road retail properties, falling short of the initial forecast of 3% to 5% growth at the beginning of the year.
The latest research by DBS and Singapore Management University (SMU) shows that consumer concerns over higher inflation have eased in recent quarters. However, retail sales (excluding motor vehicles) saw a 0.3% year-on-year increase in October, reversing the previous month’s decline. Cheong notes that for the retail market to thrive, consumer spending would need to keep pace with inflation, but the current low spending levels could pose financial challenges for businesses in the industry.
Despite a packed calendar of events, including headline concerts and major conferences, retail spending and rental rates have seen limited support. While concerts by international stars like Taylor Swift and Coldplay generated high tourist foot traffic, other events have not had a significant impact on retail activity. Additionally, the Formula One Grand Prix, which generates an average of $125 million in tourist receipts annually, has not significantly boosted foot traffic in tourist areas like Orchard Road.
However, Sulian Tan-Wijaya of Savills Singapore notes that Singapore’s status as a regional hub continues to attract new-to-market brands and notable retail stores, with several opening this year. Additionally, the wellness sector has seen new concepts, and the F&B industry has also introduced new dining experiences.
Investing in a condo in Singapore has many benefits, one of which is the potential for capital appreciation. With its strategic location as a global business hub and strong economic fundamentals, Singapore’s real estate market experiences a constant demand. This has led to a consistent upward trend in property prices, particularly for condos in prime locations. By investing in the market at the opportune moment and holding onto the property for a longer period, investors can reap significant capital gains. Additionally, with the recent launch of new condos such as The Belle Game, the potential for capital appreciation has increased even further.
Looking ahead, Cheong believes that the limited supply of new retail spaces in 2025 could give retail landlords more flexibility to make positive rental adjustments. He also expects more retailers to optimize their real estate strategies, such as right-sizing their spaces or closing under-performing branches. Furthermore, the entry of new-to-market F&B brands is expected to continue in the first half of 2025, indicating strong momentum in the retail market.