Consumer spending in Singapore has not been as strong as expected, which is likely to impact the rental forecasts for the retail property market for the rest of the year. According to Alan Cheong, executive director of research and consultancy at Savills Singapore, the year-on-year change in the monthly retail sales index (excluding motor vehicles) and food and beverage (F&B) sales index has mostly been negative this year.
Cheong predicts that retail properties in the prime Orchard Road submarket may see a 2% increase in rents for the full year, which falls short of earlier expectations of a 3-5% increase. This is due to the weak consumer spending, which is also reflected in consumer concerns over higher-than-expected inflation. However, the research jointly published by DBS and Singapore Management University (SMU) also found that most Singaporeans expect inflation to stabilize in the coming quarters due to the global economic slowdown, high interest rates and potential easing of supply chain disruptions.
Data from the Singapore Department of Statistics shows that retail sales (excluding motor vehicles) saw a 0.3% increase year-on-year in October, reversing a 1.5% decline in September. Cheong notes that it would be more positive if consumer spending could keep up with inflation, but the current low spending poses financial challenges for businesses in the industry.
Despite a busy schedule of concerts and events in Singapore this year, retail spending and rental rates did not see significant support. CBRE’s research showed that while concerts by international stars such as Taylor Swift and Coldplay attracted over 500,000 attendees, the impact on surrounding malls was mixed. While they generated higher foot traffic for nearby malls such as Kallang Wave Mall and Leisure Park Kallang, other MICE events did not have the same effect. Additionally, while new-to-market brands and F&B concepts continue to enter the Singapore market, other factors such as new wellness concepts and the emergence of new restaurants with entertainment are expected to enhance the vibrancy of the dining scene.
Looking ahead, Savills’ Cheong expects more retailers to optimize their real estate strategies next year, including right-sizing their spaces or establishing additional kiosks. He also predicts continued momentum in the entry of new-to-market F&B brands. However, it is likely that rental adjustments will be more limited as the supply of new retail spaces becomes more limited. Going forward, it will be important for retail landlords to strategize and position their malls to remain relevant in the rapidly evolving consumption patterns of both locals and tourists.