Tourism recovery pushes Orchard Road retail rents up 2.3% y-o-y in 4Q2024: Savills
Recovery in inbound travelers has generated demand for retail place in tourist areas, according to a statement by Savills Singapore. Rentals of Orchard location malls tracked by the consultancy documented a 2.3% y-o-y rise last quarter, while suburb shopping centers dropped slightly by 0.1% y-o-y throughout the exact same duration.
He adds: “However, the overall retail sales effectiveness remains unpredictable as clients move their spending patterns and behaviours. Paired with tight prime retail supply in the near term, sustained renting demand in tourist destinations and prime-facing locations are expected to proceed driving prime retail rents.”
According to Savills Singapore, this is in line with URA’s rental index data, which monitored leas in the major location growing at a much faster rate of 1.0% y-o-y in 4Q2024. Meanwhile, rental fees in the fringe location fell by 1.0% y-o-y for the same duration.
He thinks that raising outbound holiday in the year to come can better reduce usage spend in Singapore, primarily in the suburban areas.
Islandwide vacancy for retail areas proceeded to alleviate, dropping from 6.5% in 4Q2023 to 6.2% in 4Q2024– the lowest in 10 years.
In general, retail lease throughout all areas reported favorable net interest in 2024, with the Downtown Core Planning Area outperforming the remainder. Net absorption for 2024 reached the highest level in the last years, at more than 1.2 million sq ft, up from the three-year historical annual standard of 958,000 sq ft.
Furthermore, openings for retail area in the Orchard Planning Area and the Rest of Central Area fell to a record low in the last five to six years on the back of enhanced take-up and limited supply. “The greater need in the Downtown Core and Orchard Planning Area might be driven by the arriving of brand-new foreign labels as the tourism recovery reinforced retailers’ esteem,” notes the Savills’ statement.
Looking ahead, tourism recovery is assumed to proceed in 2025 with 17 million to 18.5 million presumed tourist landings adhering to a pipeline of recreation and Mice activities, claims Alan Cheong, executive manager of research and consultancy at Savills Singapore.
Rental growth for malls in the Orchard location is forecasted to reach the upper bound of the 1% to 2% range in 2025, while suburban rental development is anticipated to come in the lower end due to sluggish residential spending, states Cheong.
