Average Retail Rent On Orchard Road Projected to Increase by Up To 6% Year-on-year for 2023 And 3-5% For 2024

Savills Research projects that average rents on Orchard Road will rise by up to 6% year-on-year (YOY) for 2023 while suburban malls will go up by about 1% – 2%, backed by the continuing recovery in tourist arrivals.

The rental growth for Savills basket of malls remained strong in Q3, with rents in Orchard Area rising 1.3% quarter-on-quarter (QoQ) to S$22.40 per sq ft. For the Suburban Area, the average retail mall passing rent in the Savills basket rose by 0.7% QoQ again to S$14.60 per sq ft in Q3.

Retail sales receipts continued rising in Q3, albeit at a slower pace. F&B sales growth also moderated slightly from an average of 4.3% year-on-year (YoY) in Q2 to 3.2% YoY in Q3.

The overall retail market sentiment is likely to remain upbeat, driving overall demand for retail space. New retail supply is expected to be limited in the near term before the slew of new projects progressively completes next year. Coupled with sustainable demand for retail space, especially in prime tourist shopping destinations, rents are likely to hold up next year, albeit at a moderate pace.

Notably, the completion of new rejuvenated retail projects such as Marina Square, Forum Mall and Harbourfront Centre, are expected to lift the overall rental expectations in Central Region. With that, average rents on Orchard Road are projected to rise by around 3 to 5% YoY next year. For Suburban Area, average rents are expected to stay flat in 2024 as outbound travel and inflation dampens discretionary consumption spend in the housing heartlands.

Alan Cheong, Executive Director, Research & Consultancy, Savills Singapore: “Retail rents on Orchard Road stand to benefit most from the strong tourist arrivals expected in 2024.”

One key retail trend observed is the growth and evolution of the fitness and wellness industry with new brands entering the market. Notably, most of the new openings are on a smaller scale, such as Trapeze Rec. Club at Tanjong Pagar (8,000 sq ft) and Freedom Gym (6,000 sq ft) on Shenton Way. The luxury retail brand Hermès also started its HermèsFit pop-up gym earlier this year on Orchard Road.

Meanwhile, some gym operators shifted their focus to suburban areas where rents are significantly lower as they identified changing consumer needs due to work-from-home arrangements.

At the same time, there was also some consolidation among the bigger fitness chains (around 30,000 sq ft), especially in central areas amid hybrid working arrangements. For instance, Pure Group shuttered two branches at Suntec City due to insufficient members. To manage their costs and improve their revenue streams, businesses will start to right-size their operations or diversify their businesses.

Sulian Tan-Wijaya, Executive Director, Savills Retail & Lifestyle: “We are seeing healthy demand from overseas retailers across many sectors looking to open their first Singapore outlet. This demand will benefit central locations especially Orchard Road, Robertson and to some extent the Civic District, Bugis and Marina Bay.”

Read the full Q3 Retail Briefing here.