Firm occupier demand in the broader retail market in Q1 2025 despite pockets of weakness

• Consumption leakage arising from outbound travel and cautious consumer spending due to inflationary pressure continued to weigh on retail sales performance. The tourism market continues to recover.
• The consolidation of weak-performing stores and the departure of retail brands from Singapore across selected malls led to a decline in space demand in Q1 2025. Despite pockets of softness, occupier demand in the broader retail market remained firm.

Islandwide vacancy rate rises in Q1 2025 after three straight quarters of decline

• Pockets of weakness in occupier demand led to a rise in the islandwide vacancy rate in Q1 2025, despite a lack of new supply. Notwithstanding, the islandwide vacancy rate remained low in Q1 2025.
• The continuous tourism growth, the buoyant MICE activities, the healthy workforce footfall and sustained domestic consumption underpinned occupier demand for retail space in the broader market.

Rents and capital value growth extend in Q1 2025

• The low vacancy rates and landlords’ proactive asset management continued to drive retail rent growth q-o-q across the three submarkets in Q1 2025, marking the 14th consecutive quarter of collective increase.
• Capital values across the three submarkets grew q-o-q in Q1 2025, mirroring rent growth and rising for the fifth straight quarter, as yields remained stable supporting investors seeking a yield spread over funding costs amid elevated interest rates.

Outlook: Rent growth will drive capital value growth as yields are expected to hold stable

• Barring any deterioration in economic conditions due to the global tariff war, sustained domestic consumption, tourism growth and Singapore’s draw as a business hub for regional growth should spur retail expansion in Singapore and, in turn, keep vacancy rates low amid moderated supply, while supporting rent growth.
• Rent growth will drive capital value growth with yields expected to hold stable supporting investors seeking a yield spread over funding costs in an elevated interest rate environment.