Occupier demand remains firm despite the cautious consumer sentiment

• Retail sales and F&B sales stayed subdued in Q3 2024 due to the lingering effects of higher inflation and consumption tax, and consumption leakage arising from the strength of the Singapore dollar. The tourism market remains on track for recovery.
• While consumer sentiment stayed cautious, occupier demand in the retail market remained firm in Q3 2024. Diverse trade groups, led by food & beverage, health & wellness, fashion and active-lifestyle & sports-related operations, continued to expand.

Lowest islandwide vacancy rate in Q3 2024 since Q3 2012

• The retail stock rose marginally q-o-q in Q3 2024, largely due to the reinstatement of withdrawn space for asset enhancement initiative (AEI) at Tampines 1, a Suburban mall. The landlord completed AEI works in the mall on schedule in Q3 2024.
• The islandwide vacancy rate fell q-o-q in Q3 2024 to the lowest rate since Q3 2012. Optimism about tourism growth, the buoyant MICE activities, the healthy workforce footfall and sustained domestic demand bolstered occupier demand for retail space.

Retail rents and capital values extend growth in Q3 2024

• Rents of prime floor space across all submarkets rose q-o-q in Q3 2024 for the 12th consecutive quarter, driven by firm occupier demand, low vacancy rates and proactive asset management by landlords.
• Rent growth and marginal yield compression fuelled the q-o-q capital value growth of prime floor space across the three submarkets in Q3 2024, marking the third straight quarter of increases.

Outlook: Lower interest rate outlook could fuel deal flow and support capital value growth

• Sustained domestic consumption, supported by the tight labour market, and the positive tourism outlook should spur retail expansion in Singapore and, in turn, keep vacancy rates low amid moderated supply conditions, while supporting rent growth.
• The rent growth outlook, a positive yield spread over funding costs amid a lower interest rate outlook and a scarcity of quality retail assets should drive capital allocation to retail assets and, in turn, support capital value growth.