What: In Singapore, rents become increasingly disconnected from the actual state of the business.

Why it is important: Is Singapore poised to become a new playground for regional players looking for new markets?

CapitaLand Integrated Commercial Trust (CICT), Singapore's largest private mall operator, has seen moderate business across various consumer segments recently, reflecting a wider retail slowdown in Singapore. Despite this, the company reported positive metrics in the first nine months of the year, including a 4% year-on-year increase in tenant sales per square foot, with higher growth downtown due to returning international tourists. Mall foot traffic and retail occupancy (99%) also increased, contributing to a 9.8% rise in gross revenue and 6.8% in net property income.

However, a slowdown is apparent in the third quarter, with lower growth rates in revenue and net property income. Turnover rents, which depend on tenant sales, could be impacted if sales continue to be under pressure. Retailers are facing rising occupancy costs, potentially affecting their margins.

Retail sales in Singapore appear fragile, with non-auto retail sales dropping in October. While food and beverage sales have been strong, there was a noticeable slowdown in October. CapitaLand's growth categories include shoes, bags, leisure, and entertainment, with food and beverages also performing well. Home furnishings, however, declined significantly, likely due to the broader economic slowdown and consumer caution.

Tourism, particularly in downtown malls, has been positive but has not yet returned to pre-pandemic levels. The outlook for Singapore's retail sector is cautiously optimistic, with expectations of a recovery in international arrivals by 2024 and moderate retail space openings planned for the next few years.

E-commerce remains steady, accounting for around 15% of retail sales. CapitaLand has been adapting its tenant mix to reduce vulnerability to e-commerce, focusing more on food and beverage, leisure, and entertainment offerings. Special events, or "proactive stakeholder engagements," are also part of their strategy to maintain consumer interest.

Singapore malls face high rents and stalled sales