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Thread: Prime retail rents in Orchard Rd stabilise

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    Default Prime retail rents in Orchard Rd stabilise


    Published September 22, 2010

    [B][SIZE="5"]Prime retail rents in Orchard Rd stabilise[/SIZE][/B]

    [B]Rental gap between Orchard, suburban malls shrinking[/B]


    THE gap between prime average retail rents at Orchard Road and suburban malls continued to narrow to 6.6 per cent in Q3 2010. This is the smallest spread in 15 years.

    Figures from CB Richard Ellis (CBRE) show that prime Orchard Road rents remained stable in Q3 after seven quarters of contraction, averaging $31.10 psf a month in the July to Sept 2010 quarter. Average rents at prime suburban malls continued to strengthen, underpinned by strong catchment demand, increasing from $28.50 psf a month in Q2 this year to $29 psf in Q3.

    CBRE said that the rental difference in the two markets was 28.8 per cent in 1996, before easing to 16.8 per cent in 2003 due to the Sars outbreak that year. It rose again to reach 21 per cent in 2007 but had narrowed to 13.2 per cent by the end of last year, as retailers along Orchard Road relying on tourists were hit by the global financial crisis.

    In Q1 and Q2 this year, the gap decreased further to 12.6 per cent and 8.2 per cent respectively.

    CBRE's director, retail services, Letty Lee, forecasts that the rental gap is likely to continue narrowing as Orchard Road adjusts to the recent new supply as well as competition from the integrated resorts. On the other hand, suburban malls enjoy mass-market appeal, thanks to their strategic locations near MRT stations and amidst ready catchments of shoppers from those living nearby.

    About 2.1 million sq ft of new retail space was completed in Singapore last year including projects such as Orchard Central, ION Orchard, [email protected], Mandarin Gallery, City Square Mall along Kitchener Road, and Tampines 1. In the first nine months of this year, close to half a million sq ft of retail space has been completed and CBRE expects a further 4.12 million sq ft to be ready from Q4 this year to 2015. Of this, just under 2 million sq ft will be completed in the next 15 months - including Phase 1 of Marina Bay Link Mall at Marina Bay, Clementi Mall and nex at Serangoon Central.

    For the whole of this year, CBRE has projected a 5 to 10 per cent fall in prime Orchard rents but a 3 to 5 per cent hike in prime surburban rents.

    The property consultancy group's data also showed that average monthly rental for super prime Orchard Road retail space slipped from $52.10 psf in Q2 this year to $51.80 psf in Q3 this year.

    Separately, Cushman & Wakefield said yesterday that Singapore's Orchard Road slipped from being the 17th most expensive retail location in the world in 2009 to 18th position in 2010. Rents of such prime retail space (in US Dollar terms) increased by only 1.6 per cent year on year from June 2009 to June 2010, it added. Prime rental rents along Orchard Road are expected to see a slight downward rental adjustment of about 5 per cent in H2 2010 and H1 2011 as the market adjusts to the effects of significant new completions in 2009 and 2010, says Cushman's senior manager (research, Asia Pacific) Ong Kah Seng.

    On a positive note, he points out that a slight rental correction in Singapore will encourage the entry of retailers - both international labels and new players with creative offerings.

    Cushman's Main Streets Across The World report surveyed 59 countries. New York's Fifth Aveue, where retail rents increased by 8.8 per cent, retained its spot as the world's most expensive retail address, for the ninth year running. Causeway Bay in Hong Kong also maintained its No 2 position. Tokyo's Ginza area rose from fifth position previously to third in the latest survey. London's New Bond Street leapt two rankings to overtake Avenue des Champs-Elysees in Paris - the biggest faller in the top 10 with a 9.5 per cent rental drop - as the most expensive location in Europe.

    Rents in most of the world's top retail locations have remained resilient during the past 12 motnhs. Around two thirds of the 59 countries surveyed by Cushman reported prime retail rents either rising or remaining static over the year to June 2010. This is a brighter picture than the previous report a year earlier which showed the biggest global fall in retail rentals in the report's 25-year history.

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