Singapore Orchard prime retail rents to rise 3% this year | Real Estate Asia

Singapore Orchard prime retail rents to rise 3% this year

And Prime Suburban rents are likely to increase 2%.

Singapore’s retail and F&B scene is expected to reap the rewards of Singapore’s economic reopening sooner rather than later. According to a Savills report, the resumption of large-scale events and Meetings, Incentive travel, Conferences & Exhibitions (MICE) events, including the upcoming Formula One race, the Singapore Food Festival, as well as trade events are also expected to have some positive spillover effects on consumption which benefit the retail and F&B sectors. 

“Nonetheless, sales and tourism numbers will take some time to rebound to the pre-pandemic levels due to factors such as protracted travel restrictions in China and more Singaporeans travelling overseas, which are expected to dilute domestic consumption,” the report said.

Here’s more from Savills:

In the face of rising manpower costs, cost of goods, utility charges, as well as rental costs, we are expecting a greater turnover amongst the tenant base. In this regard, the rise in retail sales for the rest of this year and next is likely to come from a mix of tourism expenditure and inflation. The google mobility numbers for retail and recreation are now returning to their 3rd January to 6th February 2020 limits. As of 20th August 2022, they show just a 2% deficit from the latter. 

However, we do not believe we can adopt a straightforward interpretation to argue the case that the market is heading back to its previous normality. While the numbers going back to the office are at the early stages of rising beyond the baseline, those staying home are still higher. This could imply that more are adopting the hybrid work arrangement not only within a week but also in a day (working a few hours in the office and at home). 

Unfortunately, the mix between working from home and office has some drawbacks. It dilutes the spending power to both the suburban and the central areas, resulting in lower aggregate spend for establishments in the two areas. Also, with overheads rising, margins will be further squeezed. Feedback from some retailers and F&B operators that have operations islandwide are pointing to rising revenues. 

Nevertheless, the increase is not in step up with rising inflation that is jacking up their labour and cost of goods. For some, their total revenues are still significantly below pre-pandemic levels. 

On a grand scale, the pandemic has also speeded up the retail and F&B evolution. It has decimated the weaker ones and those unable to adapt rapidly to changing consumer behaviour. This change is epochal and has expanded to affect even malls such as Bedok Point and JCube, both making way for residential use. 

Also, with consumers' greater acceptance of food delivery services, the location factor for F&B can be partially overcome by F&B operators that are savvy in reaching out to customers using social media. Therefore, the interpretation of the Google mobility numbers will become more convoluted and change over time.

With the return of landlords raising rents, it would push tenants with thin margins either out from the industry or seek alternative locations. The vacated space will be backfilled by retailers that have done well in the past two years or those new to that area. 

For example, notwithstanding the high rents at suburban malls, well-located malls with high shopper traffic and good connectivity such as Jurong Point and Northpoint City continue to attract new retail chains such as Don Don Donki, which will unveil its new outlets by the end of this year. Popular hotpot chain Haidilao is also expanding at Jurong Point in September, taking up a prime unit next to the drop-off entrance at level one. 

Meanwhile, the Indonesian fashion label, Claude, has also recently opened its first boutique in Singapore at Ngee Ann City. These are showing that some retailers are getting confident and, despite the rising rents, they are supporting the occupancy rate in prime malls. 

With the above-mentioned, we forecast Prime Orchard retail rents to increase up to 3% YoY and for Prime Suburban to go up by 2% YoY in 2022.


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