Singapore, 9 June 2016 - Average prime retail rents in Orchard and Suburban as tracked by CBRE Research continued to fall in Q2 2016. Average prime Orchard Road rents stand at $32.50 psf/mth currently, down 1.1 per cent from the first quarter of 2016. This marks the sixth consecutive quarter of decline for Orchard Road. Average prime rent for the Suburban submarket fell 0.7 per cent to $29.45 psf/mth from the first quarter of 2016. This sub-market is relatively more resilient as prime suburban rents only began to fall in the last quarter of 2015.
Desmond Sim, Head of Research, Singapore & South East Asia, CBRE said “Our research shows a clear reduction of rentals and it would not be accurate to report otherwise, as the retail sector is still undergoing restructuring and is currently an occupiers’ market. Rents have certainly remained under pressure but there are still sparks of activity, particularly around well-located and well-managed suburban malls that have a strong positioning tilted towards families and the immediate catchment such as Compass One, which recently reported 90 per cent precommitment. With the positive momentum continuing, I would not be surprised if Compass One achieves full occupancy ahead of its opening.”
Compass One is re-opening after an asset-enhancement exercise. It has seen a strong showing from returning tenants, who are attracted to its concept of a family mall. Malls which are located near transport nodes, a good tenant mix and the guarantee of a day and night catchment will continue to be more resilient in terms of rents and occupancy under the current market climate.
While general vacancy has been rising and more retail stock can be expected, the availability of prime space in good locations is scarce. This has deterred the expansion and entry of some retail brands as location, visibility, and high foot fall have become even more important factors than ever due to intense competition within the market. With no foreseeable new supply in Orchard Road and Marina Centre in the next few years at least until 2019, this should provide some support for prime rents in Orchard Road for the next half of the year.
F&B brands continued to be active in Singapore this quarter. Most of the new foreign cafes and restaurants which have opened or leased space in Singapore originate from the Asia Pacific region such as Honolulu Café, and a food-hall concept named Itadakimasu by Parco. Cosmetics, street and foot wear are seeing signs of more activity. Flagship stores are also trending, in tandem with the growth of e-commerce and a need to engage consumers more actively.
“The market is particularly challenged by a mismatch of demand and supply at this point in the cycle. While most of the limits to expansion stem from consolidation activity, there are some retailers who are constrained by the shortage of quality space” Mr Sim added.
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