Retail rents are predicted to continue rising in 2024

Rents for Singapore retail landlords increased in 2023, up from the pandemic lows they had previously experienced. This was due to tourists returning and domestic spending gaining.

Market watchers said that while inflationary pressures and a higher Goods and Services Tax may be temporary, it is unlikely they can dampen sales at retail and decrease rents.

The rents of prime retail space will increase by 1.5 to 4.1 percent in 2023. This is due to the strong performance of the Orchard Road sub-market and the Downtown sub-market.

Rents for retail space are rising because of the growing demand for shopping malls of Tier 1, such as Ion Orchard and Nex, as well as an increase in inflation.

Because of the rebound in the tourism industry and sales of revenge the sales of tenants in Tier-1 malls are higher than they were before Covid. Rents are rising and property prices are increasing.

Retail sales grew from February through September 2023. They then dropped in October. Retail sales in November were valued at S$4.1 billion, according to Department of Statistics.

Food and beverages will continue to remain the primary reason for new mall openings by 2023. This sector will represent 48 percent of all new openings. Fashion, beauty and wellness were the second most-loved openings.

Singapore’s foreign tourists arrived in November for the fourth time in a row month. They totalled 1.1m but were significantly higher than the 816,340 tourists during November 2022. Prior to the pandemic, 1.5 million tourists visited Singapore in November 2019.

Analysts predict that Orchard Road rental prices will rise as tourist spending continues to increase. However, downside risks still exist.

Tourism is expected to completely rebound by 2024. High inflation and rising oil costs may increase the cost of transport and lodging for tourists.

In light of the macroeconomic conditions, travelers are likely to be more cautious about their travel plans and their spending.

The strength of the Singapore Dollar is driving Singaporeans to travel internationally, but the ability to purchase for travelers will be restricted.

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The retail sales of stores have been impacted by the rise in GST and inflation.

Analysts predict that Orchard Road will see a price increase and rent increase as the street is rejuvenated and becomes a lifestyle destination.

Orchard Road properties are attracting more interest. Tanglin Shopping Centre was sold in 2022 for S$868 million and Far East Shopping Centre went for S$908 million. Scotts Square, a shopping center in Singapore’s Scotts Square, is for auction for S$450 million.

Redevelopment of older buildings along Orchard Road can bring new retail space that could draw tenants and increase rents. These areas could transform into areas that are more well-known and lively, with an increase in foot traffic.

The malls of the strata often are a mishmash due to the owners who operate their own retail and F&B concepts as well as the owners who lease their properties in accordance with rent rates, with no attention to the types of concepts or synergies between trade.

The malls that are undergoing an overhaul will offer an improved shopping experience for their patrons and draw in younger shoppers.

Rents are expected to rise between 3 and 5 percent per year in Orchard Road.

Rents in suburbs will likely remain flat since the rate of inflation and outbound travel reduce demand in the middle regions.

According to URA data, an estimated 570,000 square feet, net lettable (NLA) of retail space is expected to be added by 2024.

This is less than 1.2m square feet of NLA completed in the year of 2019. This figure is higher than the 443,473 square feet of NLA retail space that was completed in 2022. It is similar to 599.549 square feet NLA in 2020.

The likelihood of a retail oversupply in the year 2024 is low and will not be a factor in retail rents for this year.

The expected completion date of Pasir Ris Mall in 2024 is approximately 280,000 square feet. Labrador Tower is also getting a smaller retail component that is estimated at 30,000 sq ft NLA.

Rents will be bolstered by supply of retail that is expected to increase until 2024, but is still lower than the average annual amount (0.62 million sq ft) in the past five years.

She said that she expected the capital value to increase by 2024.

URA figures show that the cost of retail spaces in Central Region has recovered by 0.9 percent from the low in Q1. In Q3 the prices were 26 percent lower than the peak of Q4 2014.