Super-Prime Orchard Mall Rents Hit Record $54.40 PSF

Source : The Business Times, July 9, 2008

5.3% increase qoq is highest of all retail micro markets tracked by CBRE

CHANEL, Gucci, Louis Vuitton are big brands that scream 'high fashion' on Orchard Road.

But lately, the screams are more likely to be the painful result of rising rents.

CB Richard Ellis (CBRE) said that super prime retail space - defined as space facing Orchard Road or in atriums - hit a record $54.40 per square foot (psf) per month in the second quarter of this year.

This was an increase of 5.3 per cent quarter on quarter (qoq) - the highest of all retail micro markets tracked by CBRE.

For the whole Orchard Road area, rents rose 1.1 per cent qoq in the second quarter to average $36.80 psf per month - also a record.

The 'uncertain global business climate and imminent supply coming on stream' now has retailers making more prudent decisions on space, said CBRE. But 'there remains an appetite for expansion and retailers are still keen to bring new brands into the market'.

An estimated 6.9 million sq ft of retail space will be completed between the third quarter this year and 2012, with 48 per cent of this coming on stream in 2009.

But still, said CBRE: 'We continued to see new entrants and openings in Q2.'

It noted that Wisma Atria houses Jayson Brunsdon, Trois + Inch and Levis Lady.

Thai fashion label Greyhound and Playhound is now available at Tangs Orchard.

And Toshin will introduce eight new stores totalling 15,000 sq ft at Takashimaya.

Of course, as new shops open, others close.

Wing Tai Retail will close two Topshop and Topman outlets in the Orchard/Scotts Road area because the leases have expired.

The 12,000 sq ft Wisma Atria outlet will close this month and the 2,500 sq ft outlet at Isetan Scotts will close at the end of August.

Wing Tai will open a new store of more than 4,000 sq ft at an undisclosed Orchard Road location later this year and expects to open a 12,000 sq ft flagship store at ION Orchard when the mall is ready.

WingTai Retail executive director Helen Khoo said: 'We have been looking for a suitable location for our new Topshop and Topman flagship store in the Orchard Road area, and are preparing for opportunities arising from a new retail landscape.'

Rents were not cited as a reason for the relocation. But rents at ION Orchard have been reported to range between $20 and $60 psf per month.

Singapore Retailers Association (SRA) executive director Lau Chuen Wei believed that high rents are 'putting a dent in retailers' bottom lines'.

'Retailers have to work out their sums very carefully and make location decisions depending on affordability as well as what market segments they want to attract,' she said.

'Several new developments are coming on stream, but there is no lowering of rents in sight,' she added.

Ms Lau said that properties offering the new space have 'clear ideas' of their positioning and what kinds of retailers they want within their properties.

Likewise, there are retailers who are very clear about where they want to be. 'It's a matter of negotiation - and who wants who more,' she said.

Knight Frank also suggested that retail rents may not suffer from future over-supply.

In a research brief, it said that Singapore had 7.4 sq ft of available retail space per person (capita) at end-2007, compared with Hong Kong's 16.2 sq ft per capita.

Based on current population growth, Knight Frank reckoned that the Singapore retail sector may have the capacity to grow by four million sq ft in the next three years to get close to the 2004 level of 7.97 sq ft per capita.

It reckoned that a rise in retail sales over the next three years, from $650.60 psf in 2007, will outpace the increase in retail space to sustain growth in space productivity at close to $700 psf in 2010.