Recovery of retail rents to be uneven: analyst

Experts forecast a slower increase of 2.0% YoY for the Suburban Area.

Challenges such as rising operation costs, labour crunch, and a slow global economy will make the recovery of retail rents uneven, according to experts from Savills.

“[These challenges] will put further pressure on retailers, reigning in their ability to accede to higher asking rents,” said Savills.

The unevenness of recovery in rents can be seen by comparing Orchard Road and the Suburban Area.

Rents in the Orchard Area have risen 1.4% QoQ to $22.10 per square foot (sq ft) in Q2. For the whole year, Savills expects rents in the area to rise to 6% YoY.

“Retail space at tourist destinations and major shopping belts, such as Orchard Road and Marina Bay Sands, is expected to benefit from the return of tourism,” Savills reported.

Meanwhile, the Suburban Area only posted a 0.7% QoQ increase in its average rent in 2Q23 to reach $14.50 per sqft.

For 2023, Savills expects a slower increase for the Suburban Area of 2% YoY due to a "greater number of Singapore residents travelling and therefore allocating more of their consumption expenditure overseas."

Overall,  Savills expects retail rents to see sustained growth given the tourism rebound and a low base from last year.