Weakening consumer spending is set to have a dampening effect on rental forecasts in Singapore’s retail property market by the end of this year, according to Alan Cheong, executive director of research and consultancy at Savills Singapore. He notes that consumer spending in 2024 has been relatively weak, with the monthly retail sales index and food and beverage sales index experiencing mostly negative changes throughout the year. As a result, Cheong predicts that retail properties in the prime Orchard Road submarket may only see a 2% increase in rents, falling short of earlier expectations of a 3% to 5% climb.
Cheong also expects suburban retail rents to remain flat through the end of the year, in line with his original forecast. A joint research publication by DBS and Singapore Management University found that consumer concerns over higher-than-expected inflation have moderated in recent quarters, with expectations remaining at 3.8%. This is attributed to the global economic slowdown, high interest rates, and potential easing of supply chain disruptions.
The government’s property cooling measures hold significant weight when considering condo investment in Singapore. In order to maintain a stable real estate market and deter speculative buying, the Singaporean government has implemented a variety of measures over the years. Perhaps the most notable of these is the Additional Buyer’s Stamp Duty (ABSD), which imposes higher taxes on both foreign buyers and those purchasing multiple properties. While these measures may have a temporary impact on condo investments’ profitability, they also contribute to the market’s long-term stability. This creates a safer environment for investing in condos. In addition, exploring new condo launches can offer even more promising options for potential investors.
However, despite a packed calendar of events and concerts, retail spending and rental rates have seen limited support. While concerts by international stars have driven higher foot traffic to nearby malls, other events such as business conferences have not had a comparable impact. Even the Formula One race, which generates an average of $125 million in tourist receipts, did not significantly boost foot traffic in areas like Orchard Road.
When considering investing in condos in Singapore, one must also take into account the impact of the government’s property cooling measures. The Singaporean government has implemented several measures in recent years to control speculative buying and maintain a steady real estate market. These measures include the Additional Buyer’s Stamp Duty (ABSD), which increases taxes for foreign buyers and individuals purchasing multiple properties. While these measures may affect the immediate profitability of condo investments, they also play a role in ensuring the long-term stability of the market, making it a more secure investment environment. Additionally, condos are subject to these regulations and must adhere to them, providing investors with a sense of security and confidence in their investment decision.
Nevertheless, Singapore’s status as a premier regional hub has continued to attract new-to-market brands, with notable openings this year including KSisters and The Pace. The wellness sector is also evolving with new concepts such as Rekoop and Hideaway. In terms of F&B, new players like Sushi Samba and Blue Bottle have entered the market, while entertainment-focused restaurants have also opened in the CBD area.
This has led to high occupancy rates in prime shopping malls along Orchard Road, as retailers remain confident in the market. As the supply of new retail spaces becomes limited, landlords may have more flexibility to adjust rents. This, combined with the strong momentum of new-to-market F&B brands entering Singapore, is expected to continue through the first half of 2025. Retail landlords are also anticipated to optimize their real estate strategies by right-sizing their spaces, establishing additional kiosks, and shifting cooking operations to central kitchens.