Rents for prime Orchard Rd space up in Q1

Published March 21, 2013, BT

 

Rise in average rent a result of revamp of several malls in shopping stretch

 

By Felda Chay

 

PHOTO: ION ORCHARD

Setting up shop: ION Orchard was one of three Orchard Road malls which took advantage of their lease renewal periods in the past year to reposition themselves. - PHOTO: ION ORCHARD

[SINGAPORE] Average rents for prime Orchard Road shop space rose for the first time in over a year in the first quarter, and are expected to hold steady for the rest of 2013 even as supply comes on stream, said CBRE yesterday.

The property services company said that average rents in prime Orchard Road rose 2 per cent to $32.20 per square foot (psf) in the first three months of this year.

This marks the first time that an increase was recorded since the third quarter of 2011, when average rents for shops on levels with the heaviest traffic along Orchard were $31.60 psf.

Said Letty Lee, director of retail services at CBRE: "The rise in average rent follows the series of asset enhancement initiatives undertaken by several of the large Orchard Road malls in the last two years. Rents have risen as a result. This, combined with the limited stock of quality Orchard Road space, accounted for the rise in average rents this quarter."

Malls such as Wisma Atria revamped their premises, while CapitaMall Trust completed The Atrium - an extension of Plaza Singapura - at the end of last year. Three malls - ION Orchard, Orchard Central and 313 Orchard - also took advantage of their lease renewal periods in the past year to reposition themselves.

CBRE said that food & beverage operators dominated the scene for new store openings along Orchard Road in the first three months.

Overall, European retailers continued to be a major player in the Orchard Road retail scene, with Korean and Japanese brands following suit.

This year, some 328,000 sq ft of retail space will spring up along Orchard Road. This will come from Orchard gateway, which is expected to add 172,000 sq ft of space in the fourth quarter, and the completion of the asset enhancement exercise at The Heeren, which will yield 156,000 sq ft of space in the third quarter.

The space, along with the completion of the repositioning exercise of Suntec City Mall and Marina Square "may put some pressure on rents", said CBRE.

It noted that labour crunch issues continue to plague retailers, with several having consolidated operations over the last few quarters.

"Still, the outlook for prime Orchard Road remains bright for the rest of the year as CBRE expects tourist numbers to remain healthy, matching the 14.4 million visitor arrivals that Singapore Tourism Board has estimated for 2012," it said.

For prime suburban space, rents remained unchanged in the first three months from the end of last year, averaging at $29.75 psf.

A substantial amount of space is expected to come onstream in the suburbs, with nearly 1.6 million sq ft of space expected by the end of 2013 following the completion of malls such as Bedok Mall, and JEM and Westgate in Jurong.

Still, retailers remain upbeat about the suburban market, said Ms Lee.

"The new malls are built with larger floorplates which can accommodate larger formats and bigger varieties. Population in the suburbs is also now more dense, which means larger catchments for the malls."