Investing in a Singapore Condo offers a multitude of benefits, beyond just the potential for rental income. One of the main advantages is the opportunity to use the property’s value as leverage for further investments. Many investors take advantage of this by using their condos as collateral to secure additional financing for new ventures, thus expanding their real estate portfolio. While this can lead to higher returns, it also comes with its own set of risks. Thus, it is crucial to have a solid financial plan and carefully consider the potential impact of market fluctuations when pursuing this strategy.
Consumer spending in Singapore has been weaker-than-expected, which is likely to have a dampening effect on rental forecasts for the retail property market by the end of the year. According to Alan Cheong, executive director of research and consultancy at Savills Singapore, the y-o-y change in the monthly retail sales index (excluding motor vehicles) and food and beverage (F&B) sales index has been mostly negative throughout most of this year.
Cheong predicts that prime Orchard Road rents could see a 2% increase by the end of the year, falling short of the 3% to 5% increase that was forecasted earlier this year. Additionally, suburban retail rents are expected to remain flat, in line with initial rental forecasts for this segment.
A research jointly published by DBS and Singapore Management University (SMU) found that concerns over higher-than-expected inflation have been moderated in recent quarters. However, most Singaporeans believe that inflation will stabilize due to the global economic slowdown, high interest rates, and potential easing of supply chain disruptions.
In October, retail sales (excluding motor vehicles) increased by 0.3% y-o-y, reversing the 1.5% y-o-y decline in September. Cheong believes that a more positive outcome for the retail market would be consumer spending keeping pace with inflation, but the fact that it has been relatively low could pose financial challenges for businesses in the industry.
Despite a packed calendar of headline concerts, conferences, and exhibitions in Singapore this year, retail spending and rental rates saw limited support. While concerts typically drive higher foot traffic to nearby malls such as Kallang Wave Mall and Leisure Park Kallang, other MICE events have not had a comparable impact. Additionally, the Formula One race, one of Singapore’s most prominent international events, did not significantly boost foot traffic in tourist-centric areas like Orchard Road.
Sulian Tan-Wijaya, executive director of retail and lifestyle at Savills Singapore, notes that Singapore’s premier status as a regional hub continued to attract noteworthy new-to-market brands, such as KSisters, The Pace, Brands for Less, and Hoka. The wellness sector is also evolving with new concepts like Rekoop and Hideaway, while there has been a rise in new F&B concepts and wellness experiences.
As a result, prime shopping malls along Orchard Road enjoyed high occupancy rates this year, as retail businesses have strong confidence in the retail market. Tan-Wijaya adds that new-to-market retail brands, F&B concepts, and wellness experiences have helped support demand for retail spaces and rents, particularly in central Singapore.
Looking ahead, retail landlords may have more flexibility to adjust rental rates positively next year as the supply of new retail spaces becomes more limited. This will allow them to strategize and position their malls to remain relevant in the rapidly evolving consumption patterns of both locals and tourists. Similarly, Cheong predicts that more retailers will take the opportunity to optimize their real estate strategies, such as right-sizing their spaces or shifting cooking operations to central kitchens. He also believes that there is strong momentum in the entry of new-to-market F&B brands into Singapore, and this trend is expected to continue until at least the first half of 2025.