Orchard Road retail rents to grow 6% in 2023: Savills Singapore

Islandwide vacancy for retail space relieved 0.3 portion points q-o-q to 7.2% in 3Q2023. “Although net demand for islandwide retail space switched negative in 3Q, the removal of 248,000 sq ft of retail space throughout the island lightened the unfavorable impact from the demand side,” Savills’ record states.

In regards to essential trends, Savills highlights adjustments inside the fitness and wellness sector to adapt to adjusting customer demands, with brand-new brands getting in the market and more openings taking place on a smaller sized range.

Heading into the new year Savills anticipates tepid financial growth, coupled with enhanced inflation and rates of interest, to result in slower growth in retail rents in 2024. Nonetheless, recurring rehabilitation in tourism is assumed to sustain rents in prime places. “Retail rental fees on Orchard Roadway stand to gain highly from the strong visitor arrivals expected in 2024,” remarks Alan Cheong, executive head, research and consultancy at Savills Singapore.

Sulian Tan-Wijaya, executive supervisor, Savills retail and lifestyle, adds that main spots remain to view healthy demand from international merchants seeking to establish their very first Singapore outlet.

On top of that, Savills notes there was some consolidation amongst the bigger fitness chains in main places over hybrid working setups. “In order to manage their costs and enhance their revenue streams, businesses will certainly commence to right-size their proceedings or broaden their services,” the record states.

The bigger rents were supported by stronger tourist figures, in which consequently triggered continued progress in retail and F&B sales. Tourist arrivals in Singapore increased to nearly 3.9 million in 3Q2023, contrasted to a quarterly average of 4.5 million in between 2015 and 2019.

The completion of revitalized retail projects including Marina Square, Forum Shopping Center and Harbourfront Centre is likewise anticipated to raise whole leasing expectations in the Central Region. Savills is forecasting Orchard retail rents to expand between 3% and 5% next year.

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Savill Singapore projects retail rentals to continue its development momentum backed by a recurring improvement in travellers appearances. In a November study report, the consultancy determines average rental fees on Orchard Road can see a full-year rise of 6% y-o-y for 2023. On the other hand, suburban shopping center rents are anticipated to grow by 1% to 2% this year.

The full-year projection comes on the back of a good productivity for the retail real property market in 3Q2023. Rents of Orchard location shopping malls monitor by Savills increased 1.3% q-o-q to $22.40 psf last quarter, while country shopping malls viewed a rise of 0.7% q-o-q to $14.60 psf throughout the same time frame.

On the other hand, rural retail rentals are expected to keep even in 2024, as outgoing travel and rising cost of living dampen optional consumption costs in the housing heartlands.

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