Retail Vacancy Rate Dropped Even Further In Q4 To Ten-year Low Of 6.2% Prime Retail Rental Expected To Be At Upper End Of Forecast, Suburban Malls To Be At Lower End
Savills Research revealed that the average retail rent in its basket of malls in the Orchard area rose by 2.3% year-on-year (YoY) in Q4/2024. This could be due to the continuing recovery in inbound visitors driving demand for retail space in tourist areas.
Average retail passing rent in Savills' basket of retail properties in the Suburban Area fell marginally by 0.1% YoY over the same period. This is in line with the Urban Redevelopment Authority’s (URA) rental index data, which noted that rents in the Central Area had increased at a faster pace of 1.0% YoY in Q4/2024 while those in the Fringe Area fell by 1.0% YoY.
Meanwhile, all regions recorded positive net demand in 2024, with the Downtown Core Planning Area outperforming the rest. Compared with the three-year historical annual average net demand of 958,000 sq ft, 2024 saw a total net absorption of more than 1.2 million sq ft – the highest in the last decade.
Vacancies in the Orchard Planning Area and Rest of Central Area fell to a record low in the last five to six years alongside improved take-up and tight supply. The higher demand in the Downtown Core and Orchard Planning Area could be driven by the arrival of new foreign brands as the tourism recovery bolstered retailers’ confidence. Thus, the retail islandwide vacancy rate continued to ease for four consecutive years, falling from 6.5% in Q4/2023 to a ten-year low at 6.2% in Q4/2024.
Alan Cheong, Executive Director, Research & Consultancy, Savills Singapore comments, “Tourism recovery – forecast at 17 million to 18.5 million tourist arrivals – is set to continue this year alongside new attractions as well as a robust pipeline of leisure and MICE events. However, the overall retail sales performance remains uncertain as consumers shift their spending patterns and behaviours. Coupled with tight prime retail supply in the near term, sustained leasing demand in tourist destinations and prime-facing locations are expected to continue driving prime retail rents.
But sluggish domestic spending is likely to dampen the rental forecast in suburban malls and other less prime areas. Outbound travel in 2025 is also expected to expand and this could dilute consumption spend here, especially in the suburban areas. While Orchard rents are forecast to reach the upper bound of the 1% to 2% forecast range in 2025, Suburban rents are projected to come in around the lower end of the forecast range.”
Sulian Tan-Wijaya, Executive Director, Retail & Lifestyle, Savills Singapore says, “Despite muted November and December retail sales due to many Singaporeans spending overseas, demand for retail spaces in Orchard remains strong, driven by overseas brands keen to expand into Singapore which remains an attractive market for new brands wanting to launch in the region.”
