Rental values for prime first-storey retail space in Singapore were unchanged in Q1 2011 as the industry continues to grapple with the demand-supply dynamics that have yet to settle, says DTZ Research.
After moving up marginally in 2010, rents along Orchard/Scotts Road were unchanged quarter-on-quarter (QOQ) in Q1 2011. The average gross fixed rent of prime first-storey space in the Orchard/Scotts Road area remained at S$39.80 per sq ft per month in Q1 2011.
The stock of retail space in Orchard/Scotts Road had increased by more than 20% from 2008 to 2010, more than the islandwide retail stock increase of 16% over the same period. Due to the economic downturn in 2009 and the significant new supply in the last two years, average rents in Orchard/Scotts Road are still below the $41.80 per sq ft per month at end 2008.
The silver lining is that little new supply is expected in 2011 and 2012 along the premier shopping street. Scotts Square is the only mall expected to be completed this year. The next major malls are expected only in 2013 from the redevelopment of the former Specialist Centre/Phoenix Hotel/Orchard Emerald Centre and the redevelopment of Yen San Building.
“Orchard/Scotts Road is the premier shopping belt which attracts both locals and tourists. Hence major retailers will want a strategic presence here. However, with many new malls sprouting up all over the island, mall owners and retailers at Orchard/Scotts Road cannot afford to be complacent,” says Chua Chor Hoon, Head of DTZ South East Asia Research. “The limited supply in 2011 and 2012 will give the mall owners and retailers some breathing space to review and improve their offerings to keep its edge,” she adds.
Retail operations in the other city areas remain challenging, buffeted by developments in the Marina Bay area. Prime rents in the area held firm in Q1 2011, which came on the back of three quarters of consecutive declines. The average gross fixed rent of prime first-storey retail space in other city areas stood at S$23.90 per sq ft per month in Q1 2011. While some malls experience high traffic and occupancy with good tenant offerings, others face turnover and vacancies particularly in the upper storeys due to poorer positioning and traffic.
Average gross fixed rent of prime first-storey retail space in the suburban malls which stood at S$33.70 per sq ft per month was also unchanged in Q1 2011. While suburban malls continue to benefit from a stable catchment demand, the large amount of supply that has come on-stream as well as those in the pipeline has restrained rental increase.
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