DBS report: Suburban retail set to outpace central malls in 2025 as local demand soars and space remains tight

SINGAPORE: Suburban retail in the city-state is expected to outpace central malls in 2025, as strong local demand and a limited supply of retail space drive growth, according to recent research by DBS.

According to a report published by Singapore Business Review, there has been a significant shift in consumer behaviour and retail dynamics, with suburban malls benefiting from a surge in local spending and low vacancy rates.

Meanwhile, central malls, particularly those in tourist-heavy areas like Orchard Road, are predicted to face slower growth.

Suburban malls show resilience amid declining traffic

In 2024, suburban retail sales saw impressive growth of 15% to 20%, despite a decline in foot traffic— a trend that is likely to persist in 2025.

Such resilience is attributed to a peak in outbound travel and increased spending by locals, which is expected to support continued organic growth.

With vacancies falling below 1% and limited new retail space on the horizon, demand is expected to significantly outstrip supply. This favourable dynamic is anticipated to lead to rental reversions of over 5% for top-performing suburban malls.

Challenges loom for central malls

In contrast, the outlook for central malls, particularly those in high-traffic tourist areas like Orchard Road, is less optimistic.

While these malls saw a rebound in 2024, fuelled by the return of international visitors, the report forecasts slower growth in 2025.

Key concerns include a potential downturn in tourist spending, compounded by the strong Singapore dollar (SGD), which may impact sales growth.

Additionally, tourists are expected to shift towards more affordable retail options, further dampening the performance of central malls.

Despite these challenges, the broader retail sector is expected to maintain favourable demand-supply dynamics, with dominant malls continuing to perform strongly.

Major players like CapitaLand Integrated Commercial Trust (CICT), Frasers Centrepoint Trust (FCT), and Lendlease REIT (LREIT) are expected to maintain high occupancy rates, with rental growth anticipated to follow.

Analysts also highlight CICT and FCT as top picks in the sector, citing attractive forward yields and a potentially strong upside if the sector’s price-to-book ratio returns to historical averages.