Published July 14, 2009

[B][SIZE="5"]CBRE expects smaller fall in retail rents this year[/SIZE][/B]

[B]It cites healthy demand for Orchard Rd space, limited suburban supply[/B]


CB RICHARD Ellis (CBRE) now expects Orchard Road retail rents to fall 10-12 per cent this year - less than its earlier estimate of 15-20 per cent.

'We expect the rate of rental decline for prime space along Orchard Road to ease given the healthy demand for existing shop space as well as high pre-commitment levels at yet-to-be completed malls,' CBRE said in a report released yesterday.

The firm now also expects suburban mall rents to contract just 5-6 per cent for the whole year - down from its earlier estimate of 10-15 per cent.

Prime Orchard Road rents fell to $33.90 per sq ft (psf) per month on average in Q2 2009 - down 2.9 per cent quarter-on-quarter and 7.8 per cent year-on-year. This means that according to CBRE's data, prime Orchard Road rents fell 6 per cent in the first half of this year.

Prime suburban rents were unchanged in Q2, averaging $28.30 psf pm. They were supported by the limited pipeline of supply in the suburbs, and the fact that suburban malls owned by real estate investment trusts (Reits) are under pressure to be yield-accretive and so are less likely to drop rents drastically. Prime suburban rents dipped a marginal 2.4 per cent in H1 2009.

The three new major malls coming up in Orchard Road have so far reported healthy leasing figures. Ion Orchard said recently that it is 94 per cent leased. And at the other end of Orchard Road, 80 per cent of the space at Orchard Central is committed. [email protected], which is due to open at year-end, has said that it is 85 per cent leased so far and will be 100 per cent let by the time it opens.

Analysts have said that the fall in retail rents is expected to moderate in H2 2009 with seasonal activities such as the Great Singapore Sale, F1 Grand Prix and Christmas festive season.