Orchard Road Rents Projected To Grow 2-3%: Indicative Of Retail Sector Recovery

For Immediate Release – Savills rental forecast for 2023 Prime Orchard Road malls is 2% to 3%, indicating a more positive trend compared to the previous forecast of 1% to 2% in the Q4/2022 Retail Briefing. Similarly, for suburban malls, the revised rental growth rate stands at 1% to 2%, from the previous projection of 2% to 3%. (Please refer to Table 1)  

Alan Cheong, Executive Director of Savills Research & Consultancy comments, “With the strong rebound in tourism, Orchard Road rents are expected to rise more than those in the suburbs.”

Savills monthly prime rents^[1] in the Orchard area saw a larger increase of 1.5% quarter-on-quarter (QoQ) to S$21.80 psf in Q1/2023 compared to the 0.9% increase in Q4/2022. (Please see Graph 3) In contrast, Savills monthly prime rents of retail malls in the Suburban Area remained unchanged at S$23.30 psf. It had previously risen for four consecutive quarters.

The Orchard Road shopping district is expected to be the primary beneficiary of the return of tourism*, while suburban malls, which had settled down to a post pandemic equilibrium where less are now working from home, will continue to dance to the vicissitudes of the economy.

Additionally, new-to-market international brands are still entering Singapore. Notable examples include Kave Home, a renowned Spanish furniture manufacturer, opening its first Southeast Asian flagship store at Raffles City Shopping Centre and Hong Kong's beauty chain Sasa planning a comeback with one or two stores, underscoring the enduring appeal of the Singapore market.

This shows the resilience of the retail industry in Singapore, where new to market brands enter and those that left re-enter the scene after a hiatus. The situation may improve further, as more international travellers visit Singapore for leisure purposes with the relaxation of travel restrictions worldwide.

OUTLOOK

Coming on the heels of the pandemic, inflation, and a slowing economy, which may possibly tip into a technical recession this year, shopping complexes are seeing a revolving door phenomenon regarding the staying power of their tenants. This could be a feature of the market for the next 12 months as the market is still trying to find a new footing in this disruptive sea change.

Alan Cheong adds, “A Darwinian environment is setting in on the retail scene with large retail and F&B establishments experimenting with concepts to pick the next winners.”

Sulian Tan-Wijaya, Executive Director, Savills Retail & Lifestyle adds: “Notwithstanding headwinds brought about by the economic slowdown and inflation, Singapore is increasingly re-capturing its status as a regional retail hub. While established retail brands like H&M and Zara go through a consolidation process, newer entrants are actively increasing their footprint in Singapore. It is an exciting time for us in Savills.”

With the retail sector's resilience, the upward trajectory of tourist arrivals, and the entry of new international brands, Singapore's retail industry is positioned for growth and continued recovery.

*International visitor arrivals recorded a 646.3% year-on-year (YoY) growth to reach 4.04 million visitors in the first 4 months of 2023.

Read the full Savills Retai Briefing Q1 2023 briefing here.