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Despite robust leasing activities with the entry of new brands and expansion of existing ones, rents of prime retail space in Orchard Road have dropped slightly due to falling tourist arrivals since March 2014, which has resulted in weaker sales.
According to a Colliers International report, average gross rents of prime retail space in Singapore’s main shopping belt dipped by 0.5 percent to S$36.25 per sq ft per month from S$36.42 in the previous quarter.
“The decrease in tourist volume and lacklustre retail sales have exacerbated an already-highly challenging and competitive trading environment,” said its Deputy Managing Director Calvin Yeo.
Apart from rising costs, shrinking profits and tougher foreign worker policies, retailers are facing stiffer completion from e-commerce firms and online food delivery services, added the report.
On the other hand, the rents of prime retail space in the Regional Centres marginally increased by 0.3 percent to S$33.72 per sq ft per month from S$33.61 previously.
Consequently, the difference between the retail rents of Orchard Road and the Regional Centres has narrowed further to 7.5 percent in the third quarter from 8.4 percent in Q2 2014.
“The narrowing rental gap reflects the dependency on tourist dollar by malls in Orchard Road, compared to the steady flow of local community footfalls captured by malls in the Regional Centres,” noted the report.
Moving forward, the prospects of the Regional Centres are expected to be rosier than that of Orchard Road, added Colliers International’s Director of Research & Advisory, Chia Siew Chuin.
“With greater pressure on malls in Orchard Road which heavily depend on tourist patronage, we are likely to see a minor adjustment of -1 percent to 0 percent in the average monthly gross rents for prime ground-floor retail space. Regional Centres are expected to see a comparatively-better rental growth of between 1 percent and 2 percent for the entire year,” Chia added.
Image source: Wikimedia Commons (User: gabbe)
Nikki De Guzman, Editor at CommercialGuru, wrote this story. To contact her about this and other stories, email nikki@propertyguru.com.sg
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