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Prime retail rents in Orchard Road were dragged down by stiffer competition for domestic and tourist dollars, as well as rivalry from suburban malls which have attracted buyers to others parts of Singapore, according to a report from Colliers International.
As a result, average monthly gross rents of prime retail space in the iconic shopping belt fell to S$35.25 per sq ft in Q2 2015 from S$35.83 per sq ft in the previous quarter. This represents a decline of 1.6 percent on a quarterly basis, following the 0.9 percent dip in Q1 2015.
Meanwhile, prime retail rents at the Regional Centres held steady at S$33.94 per sq ft, which is similar to the figure seen in the preceding quarter. So far, monthly gross rents in this sub-market have risen by a total of 1.7 percent since the first quarter of 2013.
Consequently, the rental advantage of the retail malls in Orchard Road over those in the Regional Centres narrowed further to 3.9 percent in Q2 2015 from 5.6 percent and 6.9 percent in the two previous quarters respectively.
“The retail property sector has continued to experience attrition, with reports on closure of shops and certain malls in Orchard Road suffering from poor shopper traffic and pedestrian footfalls,” said Colliers’ Deputy Managing Director Calvin Yeo.
“However, given the demand for more retail variety by an increasingly more affluent consumer base, new-to-market F&B and retail operators continue to set up shops in Singapore. This has helped to shore up occupancy rates of retail malls and cushion rental falls.”
In terms of prices, average capital values for strata-titled retail space in the Regional Centre were flat at S$4,491 per sq ft in Q2 2015, while that in Orchard Road was unchanged at S$6,803 per sq ft, noted the report.
Looking ahead, rents and prices of prime retail space are expected to hover at their current level or slip downwards amidst the challenges being faced by retailers.
In particular, average monthly gross rents for prime ground floor retail space in Orchard Road could drop by up to five percent in 2015, given the sluggish tourism sector and fierce competition from suburban malls. In contrast, rents of retail premises in the Regional Centres could see a growth of between -1 percent and 1 percent this year.
As for prices, average capital values could continue to trend laterally at most in the second half of the year just as they did in 1H 2015.
Nikki De Guzman, Editor at CommercialGuru, wrote this story. To contact her about this or other stories email nikki@propertyguru.com.sg
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