Savills Research shares that the islandwide retail vacancy rate continues to ease marginally from 6.6% in Q2/2024 to 6.5% in Q3/2024, which is the same level a year ago and the lowest since 2014. 

The net take-up was evenly distributed across the Central Region, other than the Downtown Core Planning Area where occupancy remained unchanged. Although the Orchard vacancy rate in Q3 at 7% is still slightly higher than Q1 (6.8%), it is the lowest in the last five years. This rate is also notably near the pre-COVID five-year average of 6.7% from 2015 to 2019. This shows the improvement in overall market sentiments in the Orchard retail scene, although retail sales have been muted. The vacancy rate in the Suburban Area remained stable at 4.6%, coming on the back of full pre-commitment of the newly revamped spaces at Tampines 1 in Q3.

With healthy demand for prime retail units, the rents for such shops grew in the third quarter, most likely causing the overall retail rents to register a little growth. Savills' retail rents rose in Q3, but at a slower pace. Quarter-on-quarter (QoQ), the average monthly rent in the Orchard Area was up by 0.5% to S$23.10 psf. Meanwhile, the average retail rent in Savills' basket of retail properties in the Suburban Area fell marginally by 0.1% QoQ to S$14.70 psf in Q3.

While Singapore’s tourism sector has shown significant recovery, and total tourist arrivals are likely to exceed the annual forecast, tourist arrivals for the first three quarters are still 12% lower than the same period in 2019. Tourist spending has also remained weaker than pre-COVID levels. Domestic spending is projected to remain muted due to inflationary pressure and economic uncertainties.

Alan Cheong, Executive Director, Research & Consultancy, Savills Singapore comments, “While intense competition from new market entrants has helped to lift prime retail rents, we project a moderated growth for overall average rents for the rest of the year. Rents should have started falling a quarter or two ago, given margin compressions that retailers and F&B operators face. But the entry of foreign F&B operators has held up rents, thus aggravating the situation of the existing operators.

However, we believe this may not persist because falling or negative margins may pervade across the retail and F&B landscape causing more to exit than foreign players entering. So, despite the tight supply pipeline in the next three years, overall rental growth is expected to generally head sideways in the next few quarters. Labour shortage and rising operating costs will continue to dog retail and F&B businesses, capping rental growth as landlords prioritise getting their malls filled. Prime facing shops may still experience healthy demand, and their rents may even rise. For 2024, we expect prime Orchard Road mall rents to rise 3% to 4% year-on-year with Suburban mall to remain unchanged.”

Sulian Tan-Wijaya, Executive Director, Retail & Lifestyle, Savills Singapore says, “The more prime retail developments will continue to see healthy demand and thus keep rental levels firm. As weaker operators close down or exit, there will always be a new operator keen to take their place and this is what keeps rents up. Singapore still remains a favourite destination for new overseas brands. While F&B operators are more adventurous on locations, the retailers still choose to launch their brands in prime Orchard or suburban malls.”

Download Savills' Singapore Retail Briefing Q3 2024 here.

For further information, please contact Alan Cheong, Executive Director, Research & Consultancy, Savills Singapore and Sulian Tan-Wijaya, Executive Director, Retail & Lifestyle, Savills Singapore as the details below.