Orchard Road retail rents to grow 6% in 2023: Savills Singapore
The full-year foresight begins the back of a positive performance for the retail real property market in 3Q2023. Rents of Orchard area shopping malls tracked by Savills climbed 1.3% q-o-q to $22.40 psf last quarter, whilst rural malls found an increase of 0.7% q-o-q to $14.60 psf throughout the same period.
Islandwide vacancy for retail space reduced 0.3 percentage points q-o-q to 7.2% in 3Q2023. “Although net interest for islandwide retail sector turned unfavorable in 3Q, the elimination of 248,000 sq ft of retail area across the island lightened the unfavorable effect from the demand side,” Savills’ report states.
The finalization of rejuvenated retail ventures like Marina Square, Forum Shopping Mall and Harbourfront Centre is likewise expected to raise overall rental expectations in the Central Region. Savills is projecting Orchard retail rental fees to grow between 3% and 5% next year.
The much higher rents were supported by stronger tourist amounts, in which consequently motivated continued development in retail and F&B sales. Guest arrivals in Singapore rose to close to 3.9 million in 3Q2023, contrasted to a quarterly average of 4.5 million between 2015 and 2019.
In addition, Savills notices there was some consolidation among the bigger fitness chains in central spots amidst hybrid working systems. “In order to regulate their costs and enhance their revenue streams, organizations will begin to right-size their operations or expand their services,” the report states.
In regards to crucial trends, Savills feature adjustments within the fitness and health market to adapt to changing consumer requirements, with new brands entering the market and even more openings taking place on a smaller scale.
Heading right into the brand-new year Savills anticipates tepid financial growth, paired with improved inflation and interest rates, to lead to slower growth in retail rents in 2024. Nonetheless, ongoing rehabilitation in tourism is expected to support rents in prime areas. “Retail rents on Orchard Roadway remain to gain highly from the strong tourist appearances expected in 2024,” remarks Alan Cheong, executive director, research and consultancy at Savills Singapore.
Savill Singapore ventures retail rents to go on its growth traction backed by a recurring recovery in travellers appearances. In a November research report, the consultancy determines average rents on Orchard Roadway will see a full-year rise of 6% y-o-y for 2023. On the other hand, suburban shopping center leas are expected to increase by 1% to 2% this year.
Sulian Tan-Wijaya, executive head, Savills retail and lifestyle, adds that main spots continue to observe healthy need from overseas stores aiming to establish their very first Singapore site.
On the other hand, rural retail rentals are expected to keep even in 2024, as outbound travel and inflation dampen discretionary consumption spending in the housing heartlands.