Singapore retail supply to underperform pre-pandemic annual average

A total of 816,000sq ft of supply is expected to be added this year.

According to Savills estimates, less than 656,000 sq ft of retail space (NLA) is expected to come online in the next three quarters. Inclusive of the completions in Q1, 816,000 sq ft (NLA) of retail space is expected to be added to the market this year. 

“This is below the annual average supply of 1.1 million sq ft (NLA) before the pandemic (2015 to 2019),” the analyst said.

Here’s more from Savills:

The major supply in the pipeline includes the redevelopment of Marina Square, Harbourfront Centre and Forum Mall. Notably, projects such as Pasir Ris Mall and the retail component of Punggol Digital District are slated to complete this year. Another large insertion of supply is expected to complete from 2028, with the bulk of 2.7 million sq ft of new retail space (NLA) coming onto the market.

Outlook

The momentum behind the tourism recovery is expected to extend to 2024, with both visitor arrivals and tourism receipts improving further from last year. In view of the trend of longer stays than pre-pandemic, tourist spending is projected to be between S$27.5 billion to S$29.0 billion this year, compared with the total receipts of S$27.2 billion in 2023. 

Coupled with improved global flight connectivity and capacity, the mutual 30-day visa exemption between Singapore and China, as well as a strong pipeline of leisure and business events for the rest of the year, market optimism is likely to improve along with higher visitor arrivals numbers and tourist spending. 

While more retailers could be attracted to popular tourist destinations, some retailers may exit the challenging retail market as they struggle with manpower shortages and higher operating costs. Retailers who have been around for a long time such as Times Book Store, has vacated their premises at Plaza Singapura and Waterway Point, while Zara at Marina Square made way for a pop-up outlet store by BHG. 

Nonetheless, with limited supply coming onstream, prime retail space is expected to continue to see strong interest and rental growth. Going forward, average rents in the Orchard Area are expected to rise by around 3% to 5% YoY in 2024. As occupancy and rental growth for retail space in the outskirts or less prime areas may remain under pressure, average rents in the Suburban Area are projected to stay flat this year.