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The rental gap between Orchard Road and suburban malls narrowed further in Q2 2015 as retailers become more drawn to the latter than those in the iconic shopping belt, according to a Savills report.
As a result, monthly rents of prime retail space at Orchard Road dipped by 1 percent on a quarterly basis to S$31.9 per sq ft, while that for the suburbs held steady at S$31.1 per sq ft.
Moreover, island-wide vacancy rose by 0.4 percentage points to 7.2 percent compared to the previous quarter. In particular, that in Downtown Core continued to increase by 1.4 percentage points to 13.4 percent mainly due to the completion of new Capitol Piazza and Suntec City Mall’s renovation. The former, which officially opened in May, has posted an occupancy level of over 80 percent, of which 65 percent was taken up by new-to-market brands.
Notable events in the local retail scene for Q2 include the start of the asset enhancement works for Orchard Road’s Centrepoint and the completion of Marina Square’s new retail wing spanning 200,000 sq ft.
“In the suburbs, the Seletar Mall at Sengkang officially opened in May. The four-storey shopping mall with two basement levels houses about 130 brands spread over 188,000 sq ft of net lettable area,” Savills noted.
Moving forward, retail rents in Orchard Road are forecasted to slide by 3 percent to 5 percent for the whole of 2015, while that in suburban malls could remain unchanged or decline by up to 3 percent.
Savills’ projection is attributed to the weak visitor arrivals, which fell 1.1 percent in April and May on an annual basis despite a 47.1 percent surge in Chinese tourists. Other issues plaguing the retail property market include the manpower crunch, higher transportation costs and the stiffer competition for visitors from other major Asian cities like Bangkok, Hong Kong and Seoul.
Maybank Kim Eng echoed this saying that the prospect of tourist-dependent malls located in Orchard Road, Vivocity and the City Hall area remains cloudy as cost-sensitive tourists are hampered by weak regional economies and currencies, especially those from Malaysia, Indonesia, Australia and Europe.
Nikki De Guzman, Editor at CommercialGuru, edited this story. To contact her about this or other stories email nikki@propertyguru.com.sg
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