Orchard Rd rents seen stabilising this year

Business Times: Fri, Sep 02
RENTS on Orchard Road are expected to stabilise this year, though the limited supply and constant demand suggests that there is potential for some upside for prime space, says a retail report by real estate services provider Savills.

Suburban rents are also likely to hold, even with the injection of new supply, as long as the malls are in a good location, with space being easier to lease out as the trade mix is more flexible.

According to the report, some seven million square feet of future supply were in the pipeline at the end of the second quarter this year. And 1.1 million sq ft of retail space could come onstream by the second half of this year, from major projects such as 112 Katong and Scotts Square.

In contrast, 38,000 sq ft of retail space were completed in Q2, according to the Urban Redevelopment Authority (URA), while the vacancy rate improved from 6.1 per cent in Q1 to 5.8 per cent in Q2. Meanwhile, the URA rental index for central areas rose slightly by 0.7 per cent in Q2, with average base rents for good-quality space on Orchard Road remaining firm at $34.4 per sq ft per month for the quarter, though ground-floor space at very prime malls could garner higher rates, the report says.

‘The mood has turned cautious as burgeoning debt in the US and the downgrade of its credit rating for the first time in history sent global stock markets spiralling. The employment outlook has also toned down a little,’ Savills notes. ‘Tourist arrivals, however, are likely to hold strong this year with the upcoming Formula 1 Grand Prix as well as the debut of H&M and Abercrombie & Fitch on Orchard Road.’

Some 3.2 million tourists made their way to Singapore’s shores in Q2 this year, 14 per cent more compared to the corresponding quarter last year.

Meanwhile, 2013 is likely to see a significant chunk of supply – about 1.6 million sq ft – entering the market, Savills reckons. This would stem from projects such as the redeveloped Specialists’ Shopping Centre, Hotel Phoenix and Orchard Emerald, the refurbished Chinatown Point, and Lend Lease’s Jem at Jurong East. CapitaLand’s mall on the site next to Jem could also be ready by 2013, Savills adds.
Source: Business Times © Singapore Press Holdings Ltd

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