Singapore’s retail market registers second consecutive growth year as rents increase 0.5% y-o-y in 2024

Rental growth in Singapore’s retail property market registered a yearly increase of 0.5% for the whole of 2024, according to real estate statistics published by URA on Jan 24. This marks the second consecutive year that the local retail market has seen rents increase, after increasing 0.4% y-o-y in 2023.

The latest data indicates that retail rents increased 0.6% q-o-q in 4Q2024, building on the quarterly increase of 0.3% recorded in 3Q2024.

On the other hand, retail prices dipped 1.3% q-o-q in 4Q2024, nearly erasing the quarterly increase of 1.7% that was recorded in 3Q2024. Nevertheless, retail prices ended 2024 with an increase of 1.0% y-o-y compared to the 1.2% y-o-y increase notched in 2023.

Angelia Phua, consulting director of research and consultancy, Singapore, at JLL, says that the latest rental and price statistics indicate that the recovery in the broader retail property market is largely on track despite ongoing economic challenges such as consumption leakage, the dampening effects of price inflation on consumption and cost pressures faced by retail operators.

Moreover, the island-wide vacancy rate in the retail property market slipped 0.3% q-o-q to 6.2% in 4Q2024. This was largely driven by decreases in the vacancy rates in the Central Region (falling 0.4% q-o-q to 7.2%) and Outside Central Region (falling 0.3% q-o-q to 4.3%) last quarter.

The downward trend in the island wide retail vacancy rate, which slipped for the third consecutive quarter, underpinned resilient occupier demand amid a moderate supply of retail space this year, says Phua.

She adds that new demand for retail space was spearheaded by the entry of new-to-market brands and the expansion of existing brands such as F&B, active lifestyle and sports, fashion labels, as well as beauty and wellness brands.

For example, French sports brand Salomon opened outlets at Ngee Ann City and Orchard Central, while Finnish lifestyle brand Marimekko opened its second outlet at Ngee Ann City after its 2023 debut at ION Orchard.

“Retailers continue to incorporate experiential elements into their bricks-and-mortar stores, to enhance the shopping experience and drive customer engagement. Zara and Levi’s reopened at ION Orchard in 2024, with Zara launching express in-store pick-up and Levi’s unveiled its first Tailor Shop,” says Wong Xian Yang, head of research Singapore & SEA at Cushman & Wakefield.

Net retail demand in the Outside Central Region reached 560,000 sq ft in 2024, over four times the 129,000 sq ft in 2023, while net supply totalled 603,000 sq ft.

Not only prime retail spaces in the Central Region have seen an uptick in demand. Net retail demand in the Outside Central Region (OCR) was 560,000 sq ft last year, about four times the 129,000 sq ft absorbed in 2023.

Wong notes that vacancy rates in the OCR rose slightly to 4.3% in 4Q2024, up from 4.2% in 4Q2023 but still below the pre-pandemic 6.2% in 4Q2019, which reflects a resilient suburban retail market. He adds: “Improved connectivity and diverse retail offerings, including lifestyle and dining options, have enhanced suburban appeal, attracting reputed overseas F&B brands. Japan’s Warabimochi Kamakura and Hong Kong’s Ging Sun Ho King of Bun have debuted at One Holland Village and Tampines Mall, respectively.”

Looking ahead, the island-wide retail vacancy rate is expected to remain tight this year, which should support rental growth for prime retail spaces, says Phua. She adds that the market will be buoyed by sustained domestic consumption, a tighter labour market, and a positive tourism outlook in 2025.

“Rent growth potential, however, could be moderated by consumption leakage arising from outbound travel and the strength of the Singapore dollar, as well as retailers’ sensitivity to rent hikes amidst a challenging and uncertain operating environment,” says Phua. Based on JLL Research’s retail asset portfolio, she expects rents for prime floor space of investment-grade retail assets to continue growing by 1.5 to 2.5% y-o-y in 2025.

On the other hand, Leonard Tay, head of research at Knight Frank Singapore, opines that the relatively strong Singapore dollar and inflationary price pressures could spur many locals to redirect their retail spending overseas. “Prime retail rental growth for 2025 is expected to ease and stabilise within a projected range of between 1% and 3%,” he says.