Surveys showed that Singapore is the world's 16th most expensive shopping location, with prime retail space along Orchard Road going for US$405 per square foot.
This is two places lower than 2007 largely due to escalating rental rates in other global markets. In Asia, Singapore's retail rentals ranked 4th, with Hong Kong retaining its position as the region's priciest shopping destination.
Property consultancy Cushman & Wakefield said retail rents rose as a result of sustained interest from international retailers.
It said there is also positive spillover effects from new tourist attractions and events in Singapore. These include the opening of the Singapore Flyer observation wheel, the Formula One Grand Prix street race and the upcoming integrated resorts.
However, market watchers said the weakening economic environment has started to affect retail rentals towards the fourth quarter of 2008. Still, they expect the sector to hold up in the medium term, backed by the influx of new malls along Orchard Road.
Commercial real estate services firm, CB Richard Ellis (CBRE), said despite deteriorating economic conditions, the retail sector has performed relatively well to date.
It added that half of the markets surveyed saw rental growth in the first three quarters of the year, with 65 per cent of them seeing increases over the last six months.
Looking ahead, it said the slowdown in consumer demand could drive down the rates as landlords become more open to rental negotiations.
CBRE added that retailers who are able to differentiate themselves, either based on price or product, will be more likely to weather the tough times. - CNA/vm
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