Quick Answer — the 2026 supply squeeze in 30 seconds
Singapore’s 2026 private condo launch pipeline is estimated at 17 projects / ~8,100 units — a 30% year-on-year drop.
This is the tightest launch pipeline since 2014 and drives pricing power back to sellers in resale and to developers in new launches.
Q1 2026 URA private PPI rose 0.3% quarter-on-quarter — the softest quarterly print in six quarters but still positive in a thin market.
The OCR led the quarter (+1.3% QoQ); the RCR and CCR posted smaller gains.
Absorption of the 2026 tranche is expected to be above 65% within launch quarter for projects priced within 3% of resale comps.
The pipeline is materially thinner — here is the number
Industry-collated data for the 2026 private condominium launch calendar shows roughly 17 confirmed new projects bringing about 8,100 units to market. That is a 30% year-on-year decline from the roughly 23 projects and 11,000+ units launched in 2025, and well below the 25,000+ units delivered annually during the 2013–2015 supply bulge. Confirmed-list Government Land Sales tenders have also leaned selective, meaning the thinner supply is unlikely to be back-filled by late 2026 GLS awards landing before 2028.
For context, the Monetary Authority of Singapore’s last Financial Stability Review (November 2025) flagged a re-normalising pipeline as supportive of price discipline. URA’s Q1 2026 flash estimate — a 0.3% quarter-on-quarter increase in the Private Property Price Index, the softest in six quarters — is being read by market analysts as the product of a thin but transacting market: fewer launches, steady take-up, no fire-sale.
Why supply collapsed
Three factors explain the 2026 crunch:
GLS confirmed-list discipline in 2023–2024. The confirmed-list parcels tendered during that period were smaller and more location-specific (River Valley Green, Clementi Avenue 1, Zion Road, Faber Walk). Fewer mega-plots means fewer mega-launches, which compresses the headline unit count.
Interest-rate overhang on developer breakevens. Higher cost of construction finance from 2022 through early 2025 kept developers cautious on site accumulation. Only the strongest balance sheets — CDL, Frasers, UOL, City Developments, Wing Tai, Allgreen, Frasers Property, SingHaiyi and a handful of JV partners — acquired in the window. The rest sat out.
En-bloc market remaining selective. Large collective sales drove much of the 2017–2019 pipeline; that channel has materially thinned in the current cycle. Owners’ reserve prices have risen faster than developer bid discipline, so en-bloc deal count has stayed low.
What the supply crunch means for prices
Historical precedent is instructive. The last sustained supply tightening (2014–2016, when unsold inventory fell from ~32,000 to under 20,000 units) preceded the sharp 2017–2018 price run-up. The current setting is not identical — credit conditions are tighter, ABSD is higher, TDSR is binding — but the directional implication is the same: thin supply supports pricing power in the following 12–24 months.
Worked example — what a 30% supply drop does to take-up maths
Assume annual new-launch absorption of 7,500–9,000 units based on the 2021–2024 average. With 8,100 units launching in 2026, theoretical absorption coverage is close to 100% of launch inventory within 12 months. Any launch priced within 3% of resale comps has a first-weekend take-up expectation of 40%–65%.
Regional read — OCR leads, CCR warms up
URA’s Q1 2026 flash estimate showed the Outside Central Region up 1.3% quarter-on-quarter — the strongest of the three sub-markets. The Rest of Central Region rose 0.9%. The Core Central Region, which had previously lagged, gained 0.4% from a low base, rebounding off its earlier decline. For a thin launch year, the flash estimates confirm two patterns: the OCR retains the mass-market depth that absorbs any supply, and the CCR is now price-competitive enough to re-attract both local upgraders and renewed foreign interest at the margin (within ABSD constraints).
Region
Q1 2026 QoQ
Q4 2025 QoQ
OCR
+1.3%
+1.2%
RCR
+0.9%
+0.6%
CCR
+0.4%
−0.2%
Q1 2026 numbers are flash estimates. URA will publish final statistics on 24 April 2026. Q4 2025 numbers are URA final.
What this means for buyers
First-time buyers should not wait for a supply glut that is unlikely to arrive. The combination of thin launches, still-positive PPI, and elevated interest rates means “wait-and-see” becomes expensive. Lock in on fair-valued new launches with a 12–18-month horizon; prioritise project quality and transit connectivity over chasing the lowest psf.
Upgraders face a cleaner market. Resale stock for HDB owners remains active (the HDB RPI slipped 0.1% in Q1 but the million-dollar category continued to set records, signalling a bifurcating resale market). Sequence the sale of the HDB before the new-launch OTP; the ABSD Remission window for second-property purchases only works when you document divestment within 6 months.
Investors should revisit the rental-yield arithmetic. OCR launches near MRT continue to show 4.0%–4.5% gross yields. With supply tight and demand resilient, net-yield maths at 2026 financing rates is at its tightest — but improving from 2024 troughs as rental growth has restarted.
What this means for sellers
Thin supply plus steady price discovery is the most favourable sellers’ market in three years. Two practical implications: (a) price your resale 1%–3% above the last-six-months median rather than at median; (b) stock ready by mid-year if you want to transact before the final-quarter launch cluster. Buyers who are priced out of new launches at psf premiums over resale will migrate to equivalent-aged resale.
Key takeaway
A 30% launch-supply drop does not translate into a 30% price rise — TDSR, ABSD and the wider macro will contain that. It does translate into narrower negotiation room for buyers, faster take-up for well-priced launches, and cleaner sell-through for well-prepared resale stock. Plan your transaction around these dynamics rather than waiting for a correction that the supply data does not support.
Disclaimer: Market statistics cited are from publicly available URA, HDB and MAS publications as at publication date. Pipeline counts for 2026 are industry estimates subject to revision as developers confirm launch timelines. This article is commentary only and not a recommendation to transact. LovelyHomes is an independent editorial publication.
Quick Answer: In Q1 2026, HDB resale prices fell 0.1% — the first quarterly decline in seven years. Yet 412 flats changed hands at S$1 million or more, a new all-time quarterly record. The headline dip and the record premium sales are both real; they just reflect different segments of the same market.
Singapore’s HDB resale market delivered a headline that surprised many commentators on 1 April 2026: the Resale Price Index fell 0.1% quarter-on-quarter — the first decline since Q2 2019. In the same breath, the Housing and Development Board confirmed that 412 flats had sold for S$1 million or above in the same three months, eclipsing the prior record of 351 set in Q4 2025.
The juxtaposition is not a contradiction. It is a portrait of a two-speed resale market: broad price moderation driven by cooling-measure discipline, overlaid by an accelerating premium segment concentrated in a handful of mature estates.
The Numbers at a Glance
Metric
Q1 2026
Q4 2025
Change
HDB Resale Price Index (RPI)
203.4
203.6
−0.1% QoQ
Total resale transactions
6,179
6,473
−4.5% QoQ
Million-dollar transactions
412
351
+17.4% QoQ
Million-dollar share of total
6.7%
5.4%
+1.3 pp
S$1.7M all-time record
Dawson Rd 5-room (Feb 2026)
—
New benchmark
The overall RPI decline is technically modest — 0.1 percentage point — and should be understood in the context of seven consecutive quarters of price growth. Analysts at Knight Frank and JLL have characterised the dip as a “soft landing” rather than a structural correction, pointing to policy-driven affordability guardrails: the Mortgage Servicing Ratio (MSR) cap of 30%, Enhanced CPF Housing Grant (EHG) eligibility reviews, and the 15-month wait-out period for private downgraders.
Why Are Million-Dollar Transactions Still Rising?
Overall resale volume has eased while the share of million-dollar transactions has climbed steadily.
The premium segment operates on different fundamentals. Million-dollar HDB flats are almost entirely concentrated in a narrow band of mature estates — Queenstown, Toa Payoh, Bukit Merah, Ang Mo Kio and Bishan — where flat supply is structurally constrained, location premiums are well-established, and buyer profiles skew towards upgraders and cash-rich upsizers.
Several structural factors underpin the record:
Supply scarcity in mature estates. Large flats (5-room and executive) in central locations such as Queenstown and Toa Payoh are finite. As older owners pass on or move to assisted-living arrangements, each resale becomes a competition between multiple qualified buyers.
Private-market spillover. Buyers priced out of District 9–10 condos at S$2,500–3,500 psf are finding that a large, well-located HDB flat at S$1.0–1.4 million still represents value on a per-square-foot basis (often below S$900 psf).
The Dawson effect. The award-winning SkyParc @ Dawson and the broader Dawson precinct continue to set benchmarks. The S$1.7 million February 2026 transaction for a 5-room flat in Dawson Road is now the all-time national record for any HDB resale flat.
Diminished Alternative Housing Supply (DAHS) effect. New private condo launches fell ~60% QoQ in Q1 2026; with fewer new options, HDB upgraders are staying put or competing harder for premium resale flats.
The S$1.7 Million Record: Unpacking the Dawson Road Transaction
The record-setting flat is a 5-room unit along Dawson Road in Queenstown. At S$1.7 million, it surpasses the previous record of S$1.588 million set in 2023 and represents a premium of roughly 65–70% over the average 5-room flat price island-wide (approximately S$610,000–640,000). The buyer paid predominantly in cash above valuation, reflecting both the location’s scarcity value and the unit’s large floor area (approximately 113 square metres).
Queenstown holds a unique position: it was Singapore’s first public-housing satellite town, developed from the 1950s onwards, and retains some of the densest concentrations of MRT-accessible, well-maintained mature flats in the city. Its proximity to Alexandra, Buona Vista, and the upcoming Greater Southern Waterfront corridor ensures continued demand from professionals and dual-income households.
Top Estates Driving Million-Dollar Transactions
Queenstown, Toa Payoh, and Bukit Merah account for the majority of S$1M+ HDB resale flats in Q1 2026.
The concentration of premium transactions in five mature estates is a structural feature of the market, not a temporary anomaly. About 90% of million-dollar HDB transactions since 2021 have occurred in the core central and near-city estates, according to HDB transaction data. This geographic concentration has two implications:
Policy relevance: The data does not indicate broad HDB price inflation. The 90% of the market transacting below S$1 million is where the cooling measures are working as intended.
Buyer planning: Aspiring premium HDB buyers need to consider that million-dollar transactions in these estates are now the norm rather than the exception. Budget planning, CPF usage limits, and stamp duty calibration (BSD applies to HDB resale transactions too) are essential.
What the HDB Resale Price Dip Actually Means
The 0.1% dip in the RPI is historically significant — it is the first in 28 quarters — but it is marginal in absolute terms. It does not imply that HDB flat prices are about to fall sharply. Key counterpoints:
Volume decline, not distress: The 4.5% QoQ drop in transactions (6,179 vs 6,473) reflects seasonality and reduced new-flat completions, not seller distress or forced selling.
Full Q1 2026 data on 24 April 2026: URA and HDB will release complete Q1 2026 real estate statistics on 24 April 2026. The flash estimate (released 1 April) covers caveats lodged up to 30 March — the final data will capture some additional March transactions.
Policy signals are neutral: MAS and MND have not signalled any relaxation of cooling measures, nor any tightening. The market is operating within the intended guardrails.
June 2026 BTO exercise: HDB’s June 2026 sales exercise will offer approximately 6,900 flats across Ang Mo Kio, Bishan, Bukit Merah, Sembawang and Woodlands. Increased BTO supply provides an alternative for first-timers, which may further moderate resale volumes in the lower price bands.
Practical Implications for HDB Resale Buyers and Sellers
If you are buying a resale flat
The flat price dip provides a marginal negotiating advantage in the broad market, but this advantage does not extend to million-dollar premium flats in mature estates, where demand continues to outstrip supply. Buyers targeting Queenstown, Toa Payoh or Bukit Merah 5-room units should budget above S$1 million and ensure their CPF Ordinary Account balance and cash savings can cover cash-over-valuation (COV), which remains common in these sub-markets.
If you are selling a resale flat
Sellers in non-mature estates may find price expectations need modest recalibration, particularly for 3-room and smaller flats where supply from BTO completions is increasing. Sellers of large flats in prime mature estates remain in a strong position — Q1 2026 data confirms undiminished buyer appetite for well-located units.
If you are a private-property buyer watching the HDB market
The correlation between HDB premium prices and private OCR/RCR condo prices is real but lagged. The current HDB resale dip has not yet translated into private price weakness — private non-landed prices rose 0.4% QoQ in Q1 2026. Monitoring both indices over Q2 2026 will be instructive.
Frequently Asked Questions
How many HDB flats sold for S$1 million or more in Q1 2026?
412 flats, the highest quarterly total on record. This is up 17.4% from the previous quarter’s 351 transactions.
What is the most expensive HDB flat ever sold?
As of Q1 2026, a 5-room flat along Dawson Road in Queenstown that sold for S$1.7 million in February 2026. This surpassed the prior record and set a new national benchmark across all flat types.
Did HDB resale prices fall in Q1 2026?
Yes. The Resale Price Index (RPI) declined 0.1% quarter-on-quarter in Q1 2026, the first quarterly fall since Q2 2019 (seven years). The full Q1 2026 HDB data is scheduled for release by HDB on 24 April 2026.
Why are million-dollar HDB transactions rising even as prices dip?
The overall price dip reflects broad market moderation in non-mature estates and smaller flat types, while the million-dollar segment is driven by structurally scarce supply in mature estates such as Queenstown and Toa Payoh. The two trends coexist because they serve different buyer segments.
Which HDB estates have the most million-dollar transactions?
Queenstown, Toa Payoh, Bukit Merah, Ang Mo Kio, and Bishan account for the vast majority of million-dollar HDB resale transactions. Approximately 90% of all such transactions are in mature, centrally-located estates.
Are HDB cooling measures being relaxed?
No. As of April 2026, there has been no policy signal from MAS, MND or HDB indicating any relaxation of the Mortgage Servicing Ratio (MSR) cap, Additional Buyer’s Stamp Duty (ABSD) rates, or loan-to-value (LTV) limits applicable to HDB resale purchases.
How does the HDB price dip affect private property?
Private non-landed residential prices rose 0.3% QoQ in Q1 2026 despite the HDB dip, representing a divergence between the two markets for the first time since Q2 2019. Analysts regard this as a soft-landing scenario rather than a leading indicator of private price weakness.
Have questions about HDB resale prices or upgrading strategy?
This article is for general informational purposes only and does not constitute financial, legal or property advice. Property prices and market conditions change; readers should conduct their own due diligence or consult a licensed property professional before making any investment decision. All figures cited are based on HDB and URA flash estimates for Q1 2026 released 1 April 2026; full statistics will be published 24 April 2026.
Singapore’s 2026 private residential market is entering the year with URA PPI up 3.4% YoY and HDB resale index up 4.1% YoY. Mortgage rates have stabilised in the mid-2% band. Private rents have softened 1–2% QoQ as expat-driven demand normalises. The five forces most likely to shape the rest of 2026 are: (1) US Fed rate path, (2) the 60% foreigner ABSD, (3) HDB Plus/Prime flat supply, (4) en-bloc activity, (5) rental yield compression from rising wages.
Every January, analysts publish a property outlook for the year ahead. Most read more like agent talking-points than analysis. This one tries to do the opposite — state the numbers as they stand at Q1 2026, name the forces that will move them, and flag where consensus is most likely to be wrong.
This is a general-market view, not a valuation of any specific district. For district-level granularity, watch our forthcoming Area Guide series. For the tax and cooling-measure context that underpins all of the below, start with our cooling measures timeline.
Q1 2026 snapshot of the five market dials that matter most.
Prices — private and public
URA Private Residential Price Index
URA PPI closed 2025 at record highs. The Q1 2026 flash estimate is +3.4% YoY, with the RCR (city fringe) band leading at roughly +4.6% and CCR lagging at +2.1%. OCR sits in between at +3.9%.
HDB Resale Price Index
HDB RPI is tracking +4.1% YoY — the eighth consecutive quarter of gains, but the pace has decelerated from the double-digit 2022 run. Million-dollar HDB transactions have broadened from central flats into Bishan, Bukit Merah, Queenstown and, increasingly, mature Bidadari and Kallang Whampoa.
Interest rates and financing
3-month compounded SORA has drifted into the 2.5–2.9% range. Fixed packages from local banks are quoting around 2.85% for two-year tenors. That is well below the 2023 peak (~4%) but still meaningfully higher than the 2020–2021 sub-2% era.
Two upshots:
Refinancing activity is picking up for loans originated at the 2023 peak. See our refinancing guide.
TDSR bites harder than it did pre-2022. Affordability constraints more than prices are now the dominant buying-decision driver. Our TDSR & MSR guide explains the maths.
Supply coming through
Segment
Units landing 2026
Impact
Private residential TOP
~10,400
Keeps rental supply refreshed
EC TOP
~3,800
HDB upgraders hand back resale flats
BTO launches (planned)
~19,600 flats
Large Plus/Prime share
Rental market
After the extraordinary 2022–2023 surge (+25% to +30% YoY at the peak), rents are normalising. Q4 2025 URA rental index was down 1.2% QoQ. Expect a sideways-to-softer 2026, especially for older non-integrated condos as expat renters rotate into newer stock.
Five forces shaping the rest of 2026
US Fed rate path. Every 25bp shift flows through SORA and fixed packages in weeks.
The 60% foreigner ABSD. Kept CCR luxury flat. Any softening would re-ignite CCR transaction volumes.
HDB Plus / Prime supply. 10-year MOP plus subsidy clawback is reshaping the 2030+ resale pool.
En-bloc cycle. Developers are land-starved; reserve prices that reflect cooling measures may finally clear.
Rental compression. Yields moderate as wages normalise; investor maths re-anchors on capital appreciation, not cash flow.
Frequently asked questions
Will prices fall in 2026?
Base case: no. Prices grind higher at low single digits. Downside case: if the Fed holds rates longer than expected and supply lands faster, a flattish 2H 2026 is plausible.
Is now a good time to buy?
Depends on your horizon and cash flow. Owner-occupier with stable income: time in market beats timing the market. Investor leveraging up: TDSR-constrained — stress-test your affordability at a 4% rate.
Which segment looks strongest?
City-fringe RCR continues to be the sweet spot for owner-occupiers. OCR near MRT interchanges wins on yield.
This guide is for general information only and is accurate as of April 2026. Singapore property rules, taxes and cooling measures change frequently — always verify current figures with URA, IRAS, HDB or a licensed professional before committing. LovelyHomes is not a financial, legal or tax advisor.
CCR, RCR and OCR are Singapore’s three private non-landed market segments defined by URA. CCR (Core Central Region) is the luxury belt around Orchard and the Downtown Core. RCR (Rest of Central Region) is the city fringe. OCR (Outside Central Region) is everywhere else. In Q1 2026 median PSF runs roughly S$2,650 in CCR, S$2,180 in RCR and S$1,650 in OCR — though the spread narrows for new launches in hot city-fringe pockets.
Every time URA releases the quarterly Property Price Index, the headlines split the private condo market into three buckets: CCR, RCR and OCR. New buyers usually learn the labels when a property agent drops them into a pitch — “this is a rare RCR freehold” or “OCR yields are better than what you’d get in CCR”. The labels shape price, rental yield, buyer profile and the resale pool you are competing with.
This guide sets out what each region is, how the 2026 numbers stack up, and where the label matters most in real buying decisions. If you are comparing condo formats as well as regions, pair this with our condo downpayment breakdown.
Illustrative 2026 median PSF and buyer-impact summary by URA region.
What the three regions mean
Core Central Region (CCR)
CCR covers postal districts 9, 10 and 11, plus the Downtown Core and Sentosa. Think Orchard, River Valley, Bukit Timah, Marina Bay, Sentosa Cove. The stock skews luxury: many freehold blocks, lower-density cluster homes, a deep pool of foreign-bought units pre-2023.
Rest of Central Region (RCR)
RCR is the city fringe — districts 3, 4, 5, 7, 8, 12, 13, 14, 15 and parts of 20. Queenstown, Tiong Bahru, Novena, Toa Payoh, Farrer Park, Marine Parade. From 2022 to 2025 this has been the fastest-appreciating band, thanks to new MRT lines and a rush of 99-year city-fringe launches.
Outside Central Region (OCR)
OCR is the suburbs — everywhere else. Punggol, Sengkang, Tampines, Jurong, Woodlands, Yishun, Bukit Panjang. OCR has the largest supply of new 99-year condo stock, the most owner-occupier demand, and the widest internal price range (budget 99-year next to premium integrated developments).
Where the numbers sit in 2026
Region
Median PSF (new + resale)
Typical 2-bedder quantum
Rental yield (gross)
CCR
~S$2,650
S$2.3m–S$3.2m
2.5%–3.2%
RCR
~S$2,180
S$1.6m–S$2.3m
3.2%–4.0%
OCR
~S$1,650
S$1.1m–S$1.7m
3.5%–4.6%
Note the yield curve inverts the price curve: OCR delivers the highest gross yield; CCR the lowest. This is why investor pockets of OCR — near MRT interchanges, business parks — have been crowded for years.
Why the label still matters
1. Financing is region-neutral, but underwriting isn’t
ABSD, BSD, LTV limits and TDSR are identical across regions. But bank valuation and loan-amount appetite can diverge: CCR luxury units are sometimes under-valued by conservative banks, producing Cash-Over-Valuation surprises. Our COV guide explains how this works in detail for HDB, but the same dynamic shows up in high-ticket CCR resales.
2. Cooling measures hit CCR hardest in absolute dollars
A 20% ABSD rise on a S$3m CCR purchase hurts more than the same percentage on a S$1.2m OCR unit. Post-April-2023 foreigner ABSD (60%) has cooled CCR rental-to-own investment demand the most.
3. Tenure mix differs
CCR has the deepest freehold pool. OCR is mostly 99-year leasehold with a narrow freehold band around older landed enclaves. For the trade-off itself, see our freehold vs 99-year guide.
Worked example — same quantum, three regions
Imagine you have S$1.8m in purchase budget. That buys:
CCR: A small 1-bedder (~650 sqft) in district 9 or a shoebox resale in Sentosa Cove.
RCR: A decent 2-bedder (~750 sqft) in Queenstown, Novena or Toa Payoh resale stock.
OCR: A generously-sized 3-bedder (~1,000–1,100 sqft) in Tampines, Sengkang or Woodlands.
For owner-occupiers, OCR tends to win on size and yield; for investors banking on capital appreciation, RCR has been the sweet spot for a decade.
Frequently asked questions
Is CCR always the safest investment?
“Safe” depends on horizon. CCR held its value better than expected through the 2014–2018 cooling-measure trough, but capital appreciation has lagged RCR and OCR from 2020 to 2025. Luxury CCR stock is also more exposed to foreigner ABSD changes.
Can a development sit across regions?
No — URA assigns each postal sector to one region. Some large projects near boundaries (for example, in Farrer Road or Redhill) feel CCR but are classed RCR. The label on the transaction determines the bucket.
Does the region change the stamp duty rate?
No. BSD and ABSD are identical regardless of region. See our BSD guide for the 2026 rate ladder.
Which region produces the best en bloc candidates?
Historically CCR and RCR, because land scarcity drives developer appetite. OCR en blocs happen, but reserve prices need to fit tighter developer margins.
This guide is for general information only and is accurate as of April 2026. Singapore property rules, taxes and cooling measures change frequently — always verify current figures with URA, IRAS, HDB or a licensed professional before committing. LovelyHomes is not a financial, legal or tax advisor.
Singapore’s vibrant retail landscape is currently navigating a period of significant adjustment as vacancy rates show a noticeable increase. Recent government data highlights that the islandwide retail vacancy rate climbed to 6.8 per cent in the first quarter of 2025. This figure represents a clear uptick from the 6.2 per cent recorded in the previous quarter. This consequently signals a shift in market dynamics. This trend is primarily driven by a slowdown in the net take-up of spaces. This has been compounded by the introduction of a fresh supply into the market. Therefore, both landlords and tenants must understand the underlying causes and future outlook to make informed decisions.
The Driving Forces Behind Rising Vacancies and Tenant Exits
Several converging factors are contributing to the challenging environment that is prompting more retailers to reconsider their physical footprint. Firstly, a prolonged slowdown across the retail and dining sectors has put sustained pressure on businesses. This economic reality is exacerbated by relentless cost pressures, including a persistent labour crunch, which retailers are struggling to absorb. Consequently, their inability to fully pass on these rising costs to consumers is resulting in painfully squeezed profit margins.
Furthermore, consumer behaviour has shifted, with shoppers becoming more cautious and cutting back on discretionary spending. This is evidenced by a drop in retail sales during February and March 2025, following a promising start to the year. In addition, the marketplace has become fiercely competitive, particularly within the Food and Beverage (F&B) sector. Some industry reports suggest the F&B scene is at risk of oversupply, leading to a cycle of rapid expansion followed by equally swift closures, which ultimately results in wasted capital and resources.
The Retail Tenant’s Dilemma: High Rents and Lease Negotiations
Unsustainable rental rates remain a critical pain point for many businesses, affecting even those in traditionally high-traffic locations. Tenants in less populated areas or developments with low footfall are understandably the most pronounced casualties of this pressure. As a result, many tenants are actively seeking to pre-terminate their leases, a clear indicator of market distress. This option, however, comes with stringent conditions that require careful consideration before any action is taken.
Typically, early lease termination requires at least six months’ notice or a significant payment equivalent to six months’ gross rent. Landlords also often require additional compensation equal to the security deposit, making it a costly exit strategy for struggling businesses. For tenants whose lease contracts do not permit early termination, the focus shifts towards negotiation. These discussions may involve requesting a rent reduction, proposing a restructured payment plan, or finding a suitable replacement tenant. These alternatives require the landlord’s explicit approval.
A Tale of Two Markets: Prime Resilience Amidst General Weakness
Despite the overall increase in vacancy, the market is not uniform, revealing a fascinating and complex picture. In the first quarter, net demand for retail spaces was a negative 129,000 square feet, starkly reversing five consecutive quarters of positive take-up. Simultaneously, about 323,000 square feet of new retail space came on stream, which new entrants absorbed, preventing an even sharper spike in vacancy.
However, a key paradox has emerged where average rents have largely held steady, particularly in prime locations. Rents in the coveted Orchard Road and suburban areas remained flat at S$23.20 per square foot (psf) and S$14.70 psf, respectively. Malls in prime districts continue to demonstrate remarkable resilience, supported by a limited supply of available space. This scarcity empowers landlords to negotiate higher rents and maintain healthy momentum for lease renewals, especially with enduring luxury retailers.
A crucial metric for understanding this resilience is the occupancy cost, which measures rent as a proportion of tenant sales. For major mall operators like CapitaLand and Frasers, occupancy costs remained sustainable below 20 per cent in 2024. This suggests that for well-positioned tenants, revenues are still growing at a pace that justifies the rental costs, showcasing a clear divergence between prime and secondary retail spaces.
Future Retail Outlook: Short-Term Stability Before a Supply Wave
Looking ahead, the market is expected to experience increased tenant churn throughout the remainder of the year. Underperforming retailers may choose to exit early or simply not renew their leases upon expiration. While new store openings have historically outpaced closures, there is a growing expectation that this trend could soon reverse. This follows a challenging 2024 where store closures hit a 19-year high, indicating deep-seated structural shifts.
In the short term, rental rates and occupancy levels are likely to remain supported over the next two years. This stability is largely due to a relatively limited pipeline of new retail supply, with under 400,000 square feet of net lettable area expected annually. However, a significant wave of new supply is looming on the horizon from 2028 onwards. This future influx, led by major developments like the Marina Bay Sands expansion, will introduce over 1.2 million square feet of space, potentially reshaping the competitive landscape once more.
For now, industry experts anticipate that Orchard Road rents will likely perform at the upper end of the forecasted 1 to 2 per cent growth range for this year. Conversely, suburban rents are expected to track the lower end of that projection, reflecting the ongoing bifurcation of the market.
