Rents on Orchard Road fringes turning soft

Rentals on the fringes of Orchard Road and the city are showing signs of softening, after recording their first dip in five quarters.

Rents of shops in the City Hall and Marina Centre areas recorded a 3 per cent drop from $21.90 per square foot (psf) per month in the previous quarter to $21.30 psf/month in Q4 2012.

Rents in the other city fringe areas fell to $14.25 psf/month from $14.60 psf/month in Q3 2012.

But prime Orchard Road rents held up better, with rentals remaining stable over the past five quarters at $31.60 psf/month.

According to a report by CRBE released yesterday, rents have remained firm as demand continues to be healthy with new-to-market entrants, particularly fast-fashion retailers, taking up space in Orchard Road.

Moreover, with three Asset Enhancement Initiatives (AEI) projects - The Heeren, Orchard Gateway and 268 Orchard Road - expected to be completed next year, demand for prime Orchard Road space is likely to remain healthy.

Already, The Heeren has received full tenant occupancy by Robinsons and Orchard Gateway is more than half pre-committed with tenants, such as Crate & Barrel, Religion, Swatch Megastore and Nike's new concept store called Amplify Women's.

Apart from the Orchard Road area, another area of focus is suburban and downtown core sub-markets that no longer cater purely to low-end type stores but attract new international stores.

By 2013, suburban malls, such as Jem, Westgate, Bedok Mall and Chinatown Point, are expected to be fully operational and will be able to widen their tenant base as the size and spending power of residential catchments increase, underlining the fact that these suburban malls are benefiting from their successful decentralisation across the island, the report added.

With two more suburban malls expected in 2014 - One KM and Seletar Mall - as well as other retail developments, such as Waterway Point, Park Hotel Alexandra and South Beach, slated for completion in 2015, prospects for the suburban market look bright.

While prime suburban rents are expected to remain steady, market analysts sounded a note of caution.

Source: Business Times –19 December 2012