Despite Growth, Singapore Prime Retail Rents Still 23% Below Pre-pandemic Rates
The new Savills Global Luxury Retail 2024 report revealed that 8 out of the 19 core luxury locations Savills tracked globally have reported an increase in headline prime rents in 2023. Singapore’s Orchard Road came in 8th place, marking a 4.1% rise in rents. At the top was Toronto’s Bloor Street where prime rents increased 16%. New York’s Madison Avenue came in second at 9.5% with Amsterdam’s PC Hooftstraat in third place at 7.4%. Prime rents at Hong Kong’s Canton Road (6th place) saw a 4.3% change. (see figure 1)
Rents had increased due to reduced availability and improving occupier demand. However, in spite of the growth, prime rents in some of the core luxury destinations were still below pre-pandemic levels (Q4 2023 vs Q4 2019). This could be seen in the large, higher-value markets such as Singapore (-23%), New York (-27%), Hong Kong (-28%) and London (-17%). (see figure 2)
This difference continued to support leasing appetite, subject to the quality of the space and market dynamics. However, the rental value spread seemed to be diminishing as a further upward pressure on rents is expected across a range of locations in 2024, albeit at a slower rate than seen previously.
The report also shared that luxury brands were focusing on physical retail and enhancing their store fronts and luxury shopping experiences.
Trend-wise, brands continued to shed marginal stores and upsize their best ones. Single-storied shops were now moving to duplexes often with a triplex façade which would ensure that the top luxury brands were a standout to their customers. This was most evident on Canton Road in Hong Kong where there is a wall of branded luxury facades along the Harbour City side of the street. The trend was also very visible at Marina Bay Sands in Singapore which had become the mecca for luxury in South East Asia.
Sulian Tan-Wijaya, Executive Director, Retail & Lifestyle, Savills Singapore comments, “According to the 2024 World’s Wealthiest Cities Report by Henley & Partners, Singapore ranks No. 4 globally following a significant 64% increase in the number of millionaires over the last decade.
The city state is not short of affluent consumers. The number of new luxury store openings would be constrained not by the shortage of big spenders, but rather the current scarcity of real estate for new luxury stores.
Indeed, we are seeing strong interest among luxury watch and jewelry brands wanting to expand in Singapore with new standalone experiential concepts which some call “maisons” catering to their top tier VVIP customers.
Luxury brands find it more challenging to secure new stores because they have very high requirements in terms of location, the mall as well as brand adjacencies. Luxury brands are extremely particular about which brand is next to them.
They want to be adjacent to their main competitors in the same “league”.
Currently, there are only so few high-end malls in Singapore, some brands could wait years before they finally get into a mall of their choice, not because the mall doesn’t want them, but because many incumbent big brands won’t want to move out.”
Marie Hickey, Director in Commercial Research at Savills, says, “In the immediate aftermath of the pandemic we saw a huge increase in new store expansion, particularly in China, therefore it’s no surprise that we have seen this slow in recent years as markets normalise. Weaker consumer confidence and spend in China, along with availability constraints in prime luxury locations in Europe, North America and Middle East means that we expect this slowing in new store activity will continue into the early part of 2025. This does not mean there isn’t the appetite to expand and optimise real estate portfolios, particularly in future growth markets in Asia and Middle East. However, we believe the bigger groups with more mature store portfolios will be more selective when it comes to store expansion strategies.”
Click here to view Figure 1: Change in prime headline rents across core luxury destinations globally
Click here to view Figure 2: Difference in prime headline rents Q4 2023 vs Q4 2019