Orchard Road Retail Rents to Grow Between 3%-5%, While Surburban Malls Remain Flat In 2024

Savills Research projects average rents on Orchard Road to rise by around 3% to 5% YoY in 2024, with the continued recovery in tourist arrivals and spending. Meanwhile, average rents in the suburbs are expected to stay flat this year, as cost push inflation is offset by weaker domestic spending due to outbound travel and weak real wage growth.

Continued recovery in air travel and tourism demand should support growth in Singapore’s tourism related sectors and mainly benefit the retail sector: the shops and F&B establishments along Orchard Road and the CBD. However, tourism recovery may not translate to an increase in Singapore’s tourism numbers this year and are likely to remain below pre-COVID levels.

With the strong Singapore dollar and high prices encouraging locals to spend overseas, there is further pressure on retail and F&B sales this year. This will affect the Fringe and Suburban retail and F&B establishments more than those along Orchard Road and the CBD. Nonetheless, the pace of growth overall for most of the sectors is set to ease this year.

Alan Cheong, Executive Director, Research & Consultancy, Savills Singapore comments, “Although we may see occupier demand for retail space soften, with sluggish domestic consumption impeding sales growth which will dampen some retailers’ expansion plans, we forecast retail rents to stay firm. Landlords’ rental expectations, especially for malls with healthy footfall and excellent accessibility, are also likely to rise alongside higher property operating costs. For instance, the wages of security guards, maintenance crews and even administrative staff have gone up substantially.

Recovery in the tourism sector will help to support rents in the tourist shopping belts, so we expect average rents on Orchard Road to rise in 2024. Average rents in the suburbs will likely be flat this year, as cost push inflation is offset by weaker domestic spending due to outbound travel and weak real wage growth.”

A sign of recovery was the opening of luxury watchmaker Richard Mille’s flagship store - largest in the world - in Singapore. Spanning 7,500 sq ft in Orchard Road, the new store seeks to provide a different experience with a restaurant, bar, sports bar, watchmaking counter and a hidden library.

Sulian Tan-Wijaya, Executive Director, Retail & Lifestyle, Savills Singapore says, “Singapore is once again gaining ground as a launchpad for overseas brands expanding regionally.

We are seeing an increase in overseas brands across many sectors including retail, F&B, wellness and fitness actively seeking prime locations in Singapore to build their regional presence.

This could well support rents especially in Orchard and the CBD.”

According to Savills estimates, more than 3.4 million sq ft of retail space are expected to come online in the next four years, from 2024 to 2027. This averages to 872,000 sq ft of new retail space per year, double the annual average supply of 478,000 sq ft from the last five years (2019 to 2023).

Major upcoming completions include the redevelopment of Marina Square, Harbourfront Centre and Forum Mall. Of note are projects such as the Pasir Ris Mall, the retail component of the revamped of Grand Hyatt Hotel Singapore and the renovation of The Cathay which are expected to be completed this year.

Another large insertion of supply is expected to complete in 2027 and 2028 and will see 2.6 million sq ft of new retail space coming onto the market. (see table here for the list of major projects in the pipeline)

Read the full Q4 2023 Retail briefing here