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Healthy outlook for retail space demand
Singapore still drawing global interest despite rising costs, labour crunch
By: Melissa Tan
ORCHARD ROAD MALLS: American furniture retailer Crate and Barrel will be the anchor tenant at the upcoming 172,000 sq ft Orchardgateway mall (above) in Somerset, which is now expected to be finished by the first quarter of next year. -- PHOTO: ORCHARD GATEWAY
DEMAND for retail space in Orchard Road and suburban areas is likely to remain healthy as more international retail brands seek to establish a Singapore presence, consultants said.
Though rising business costs and a manpower crunch have put a dent in rents and occupancy rates in the short to medium term, Singapore is gaining more recognition as a global city, they added.
Orchard Road is set for a renewal, with old malls being refurbished and new ones built.
Take the former Heeren. It will be turned into a six-storey, 180,000 sq ft regional flagship department store called Robinsons Orchard.
The refurbishment of Shaw Centre and Shaw House is also likely to be finished by early next year, said Orchard Road Business Association (Orba) executive director Steven Goh.
Mr Goh added that the prime shopping district has managed to attract international brands such as French confectioner Laduree, Hong Kong fashion conglomerate I.T and American furniture retailer Crate and Barrel.
Crate and Barrel will be the anchor tenant at the upcoming Orchardgateway, a $700 million, 172,000 sq ft mall on the site of the former Specialists' Centre, at Somerset. It was supposed to be completed by the end of this year but Mr Goh said it is more likely to be finished in the first quarter of next year.
Another mall is 268 Orchard Road, which is being redeveloped by a unit of Ngee Ann Development into a 147,500 sq ft complex likely to open early next year.
These projects are set to give the area a fresh lease of life.
With many international brands still choosing Orchard Road to make their debut, Orba and mall owners are working together to ensure the area maintains its vibrancy, Mr Goh added.
Consultancy Colliers International said occupancy rates in Orchard Road slid from 95.1 per cent as at the end of last year to 92.7 per cent as of March 31.
"Nonetheless, with overall occupancies above 90 per cent, demand for space in Orchard Road is still robust with retailers looking for well-located space in the popular malls," said research and advisory head Chia Siew Chuin.
Estimates of average Orchard Road rents ranged from $32.20 to $36.75 psf per month as at the end of March, depending on the basket of properties tracked.
Colliers found that rents were 1.3 per cent down quarter-on- quarter, reflecting retailers' resistance to further rental increases, especially in older malls, while CBRE said they grew 1.9 per cent from the preceding quarter.
CBRE said Orchard Road retail rents fetch a roughly 8 per cent premium over suburban retail rents, which stayed flat at $29.75 psf per month in the first quarter.
"Resilient domestic demand and a healthy tourism market have managed to stabilise the rental market in the suburban market," said CBRE retail services director Letty Lee, adding that the bulk of retail supply this year will be in suburban areas.
This comes mainly from the 818,000 sq ft Jem and 420,000 sq ft Westgate malls in the Jurong Lake District. Others include the 88,200 sq ft Paya Lebar Square and 220,000 sq ft Bedok Mall.
Colliers' Ms Chia said suburban malls tend to be more resilient than those in Orchard Road as they "cater to an immediate captive residential catchment population".
Suburban retail occupancy rates were at a solid 97.3 per cent as of March, edging down from 97.7 per cent as of December.
Ms Chia added that the overall retail sector was likely to remain resilient despite uncertain conditions, noting that the average occupancy rates of shop space islandwide stayed at a healthy 93 per cent during the Asian financial crisis in 1997 and 91 per cent during the Sars pandemic in 2003.