Prime Orchard malls' retail rents inch up 0.3% in second quarter; limited new supply ahead

The average monthly rent for prime malls in the Orchard area went up slightly by 0.3% q-o-q to $23.70 psf in the second quarter of this year, extending modest gains from the first quarter.

That is based on Savills Singapore's basket of retail properties, the real estate consultancy said on Aug 19.

Leasing demand in the prime retail segment remains supported by luxury, beauty, wellness and experiential brands.

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Moreover, even as tourist arrivals declined y-o-y in the second quarter, Orchard Road’s prime retail malls are drawing spending from Gen Z and Gen Alpha, Savills observed.

Demand for such space may thus be buttressed by concepts targeting these young consumers, noted Alan Cheong, executive director of research and consultancy at Savills Singapore.

Sulian Tan-Wijaya, executive director, deputy head of private wealth and head of retail at the firm, said: "With Gen Z and Gen Alpha increasingly driving retail spending trends, we note that fashion brands like Brandy Melville and Subdued, which target this young segment of female customers, are trading well."

She added that retailers, particularly those in fashion and beauty as well as cafes, stand to benefit if their brand narrative and offerings resonate with this "increasingly influential" group of consumers.

Meanwhile, the vacancy rate at retail malls in the Orchard area held largely steady on a q-o-q basis at 7.2%, rising a tad from 7.1% in the quarter prior. Savills said this was supported by sustained demand and a constrained supply pipeline.

Leasing demand across the Orchard area continued to be concentrated among luxury brands, international retailers and experiential concepts — particularly along Orchard Road and within the prime city centre, where occupiers still sought flagship stores and larger-format spaces for a stronger brand presence and to better engage customers.

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On the supply end, it estimates about 309,000 sq ft of net lettable area is scheduled for completion in 2026, below the five-year average of 474,000 sq ft.

In 2027, new supply is expected to moderate further to 241,000 sq ft — about half the historical average.

Notable projects above 100,000 sq ft in the pipeline:

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*Savills estimate, based on an efficiency rate of between 70% and 75%. Source: Company announcements, URA, Savills Research & Consultancy.

"Against this backdrop of limited new supply, landlords have stepped up asset enhancement and redevelopment initiatives to enhance asset performance and adapt to evolving consumer preferences," Savills noted.

These include the ongoing revamps of Plaza Singapura and Nex, and the redevelopment of HarbourFront Centre.

Even among malls not undergoing major redevelopment, landlords are refreshing their tenant mix with new concepts to remain relevant and drive shopper traffic.

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For example, Parkway Parade recently brought in tenants such as Stuff'd, Ramen Hitoyoshi Lobster & Grill, Tim Hortons, Gyukatsu Kyoto Katsugyu and Supergreen. Also, brands including Shake Shack are expected to open later this year.

Savills highlighted that the suburban retail segment attracted strong investor interest in the latest quarter, as seen from the transactions of i12 Katong and White Sands. Keppel sold the Katong mall to Altallo for $372 million, while White Sands in Pasir Ris changed hands for $467 million, from Frasers Centrepoint Trust to Growth Capital.

In the Central Region, the limited availability of trophy assets supported capital values of retail assets, as demonstrated by the acquisition of Paragon. The freehold development on Orchard Road was acquired by CapitaLand Integrated Commercial Trust from Cuscaden Peak for $3.9 billion.

Overall, Singapore's retail property market is likely to stay resilient through the rest of the year, given healthy consumer spending and a firm labour market, according to Savills.

Its outlook is "positive but measured", projecting average passing rents for both Orchard Road and suburban malls to increase by 1–2% for the whole of this year.

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