Knight Frank urges variable rent model as retail rents climb 2.6%

Orchard Road retained the highest gross rents even as its growth moderated for a third quarter.

The retail market needs to be supported by rental flexibility amid an uncertain market, as geopolitical shocks add cost pressures on retailers and dampen consumer confidence.

“In an uncertain market when geopolitical shocks add more cost pressures and temper consumer confidence, retail resilience could start by tweaking rental flexibility with lower base rents, and more shared growth through elevating a performance variable,” Knight Frank
CEO Galven Tan said in a new analysis.

Data from Knight Frank showed that the average gross rent of prime retail spaces island-wide rose 2.6% year-on-year (YoY) to $29.00 psf pm in the second quarter of 2026.

The Marina Centre, City Hall, Bugis area recorded the sharpest YoY increase at 4.2%. Orchard Road, meanwhile, remained the premier shopping belt and still commands the highest average gross rents across all precincts, though its rental growth moderated for the third consecutive quarter since the fourth quarter of 2025.

There were also several F&B and retail outlet closures during the quarter. These include Old School Delights at Esplanade, Encore by Rhubarb, Wing Seong Fatty’s Restaurant, Jumbo Seafood’s flagship East Coast Seafood Centre outlet, Tim Ho Wan at Plaza Singapura, and Don Don Donki alongside other retailers at HarbourFront Centre.

Knight Frank noted that some of the closures were driven by redevelopment plans, underscoring the ongoing impact of constant asset repositioning in Singapore’s retail and dining landscape.

There were also new entrants coming in, including CHAGEE at Sengkang Grand Mall and Torikizoku at VivoCity, whilst Yang's Dumplings at Bugis Junction and Rituel Tokyo at Ngee Ann City have recently opened.

“This steady pipeline of new concepts, particularly from overseas brands, highlights that Singapore remains an attractive location for expansion. This attractiveness also drew returning players, such as Holland & Barrett and Mom’s Touch, re-entering the market after previously exiting,” the company said.

Knight Frank also said that the upcoming RTS Link is expected to enhance Johor Bahru’s appeal as an alternative growth market for Singapore-based F&B and retail operators, supported by its lower occupancy and operating costs.

“Although a substantial fixed base rent is more appealing to larger institutional/corporate landlords for reasons of income predictability, it may be worth considering a lowered base rent and raising the variable component of rent that is tied to operator performance,” Knight Frank said, adding that this could provide retailers with space to adapt and survive.

“The latest tranche of government household vouchers for essential goods could ease cost pressures, potentially lifting discretionary spending. These factors are likely to underpin retail activity, with rents projected to remain stable and register growth of approximately 2% to 4% for the full year 2026,” the company said.