Suburban prime occupancy normalies back to pre-COVID levels. Singapore’s retail market remained stable in 1Q25, despite a slight rise in the overall vacancy rate to 6.8% (+0.6ppt q-o-q), as retailers took a more cautious stance amid macro uncertainty as global trade tensions grew. Suburban retail continued to anchor performance with islandwide occupancy hovering around 96%, reaffirming its status as the most resilient segment. In contrast, central retail saw more mixed trends, with Orchard and Downtown occupancy leading the rise in vacancy rate in the quarter, but maintainted at c.94%. The suburban-central occupancy gap remained tight at approximately 2.6%, significantly lower than the pandemic-era peak of 7.3%, suggesting more balanced demand across locations. Meanwhile, the pipeline of new supply tightened further by 3.9% q-o-q to 525,000 sqm GFA, contributing to a constrained development landscape that may help keep vacancies in check over the medium term.

Demand

Year started strong with robust January retail sales boosted by CNY sales. Singapore’s retail sector saw a modest recovery in 1Q25, underpinned by strength in luxury and essential segments. Watches & jewellery rose by an average of +10.9% y/y, followed by cosmetics & toiletries (+5.9%) and supermarkets (+0.4%), as consumers maintained spending on core and aspirational items. However, momentum softened after January’s Chinese New Year boost, with discretionary categories such as apparel & footwear (-6.4%) and furniture (-1.6%) leading declines in this category. F&B sales were weaker overall, with restaurants (-6.4%), cafes & food courts (-3.2%), and fast food (-0.2%) recording year-on-year declines, reflecting a pullback in dining out. Online sales remained a key structural support, accounting for over 13% of total retail sales and surpassing 50% in tech-related segments.

Consumption cautiousness amplified in March as trade tensions escalated. The moderation in consumption was amplified in March as U.S.–China trade tensions escalated, fuelling renewed economic uncertainty. Rising tariffs risk had a notable dent on consumer confidence, prompting households to tighten discretionary spending. This was reflected in March's retail and F&B figures—total retail sales rose just +1.1% y/y, while F&B sales contracted by -2.8% y/y, reversing gains seen earlier in the quarter. Recent surveys and commentary highlighted growing consumer caution, with many deferring non-essential purchases in anticipation of higher costs and global volatility.

Outlook

Retail sales outlook – China arrivals to give boost to central malls. Singapore’s retail sales are projected to grow by around +2.0% in 2025, supported by steady employment, easing inflation, and a recovering tourism arrivals. Tourist-facing segments are expected to lead the recovery, with international arrivals forecast to return to 17–18.5 million for the year, driving demand for luxury, fashion, and lifestyle retail in key precincts like Orchard Road, MBS, and Sentosa. High tourist spending and renewed retailer expansion are likely to support prime rents, while suburban and discretionary retail may underperform amid cautious consumer sentiment. Overall, retail growth is expected in the low-to-mid single digits, with geopolitical risks such as trade tensions remaining key downside factors.

Positive on suburban retail as discretionary spend takes a toll on high living cost pressures.  As we move into 2025, suburban retail looks set to outshine central retail, thanks to locals cutting back on overseas travel and a solid economic outlook for Singapore. While the Singapore-Johor Bahru Rapid Transit System (RTS) is on track for a late 2026 launch, we don’t see it shaking up the retail scene in 2025-2026 in a big way. We’re more upbeat about suburban retail holding up better than central malls, especially with cost-of-living pressures still running high. The latest round of CDC vouchers should keep hawker centres and supermarkets busy, helping ease household expenses. On top of that, wage growth for lower-to-middle income earners should give a lift to everyday spending in suburban malls, keeping them a stronghold for essential retail and services.

Supply

Cap rates supported by market transactions. Singapore retail assets with a c.4.25% to 4.50% cap rate continue to hold a positive carry against the 10-year Singapore treasury yield, supported by as the turn in interest rate environments has substantially lowered funding costs from a peak of 3.5%. Asset yield spread against the 10-year SG treasury reaches back to a 2-year high of c.2.0%. Transactions continue to reflect strong investment appetite for SG retail assets, notably, Ion Orchard’s deal at 4.9% cap rate and Seletar Mall’s transaction at an estimated low 4% yield were some of the chunkier transactions to take place this year.

Immediate pipeline comprises mainly of small projects and redevelopments. Retail completions in 2025 will be headlined by several high-profile projects, including the final retail phases of CanningHill Square, the revamped West Mall with an expanded library, and the Forum at Resorts World Sentosa, which is progressively reopening under the RWS 2.0 upgrade. Keppel South Central has already achieved T.O.P. in February 2025, adding new retail and office supply in the CBD fringe. While the Marine Parade Community Mall will complete in early 2026, the bulk of 2025 completions are expected to reinforce prime and suburban retail offerings, with a focus on mixed-use integration and experiential repositioning. The remaining projects consist of mainly small and scattered retail space accompanying the launch of new integrated development and residential estates for the likes of Pasir Ris 8 and Lentor Modern.

Bigger projects on a longer horizon. The bigger projects in the pipeline are generally concentrated within the suburban area, representing c.61% of total supply pipeline from 2024 onwards. We note that more than half of upcoming supply are loated within the East-North East region of Singapore (c.46% of total upcoming supply), which has generally less retail options. This includes a retail components accompanying the Punggol Digital District (23k sqm) and Golden Mile redevelopment (10.7k sqm), alongside the longer-term redevelopment plans across three freehold Orchard sites (Forum, covo and HPL House). 

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Derek TAN Weixiang
[email protected]

Dale LAI
[email protected]

Geraldine WONG
[email protected]

Tabitha FOO
[email protected]