PRIME street-front retail rents in most cities worldwide shrank by double digits - and in some cases, as much as half - over the past 12 months as consumers cut back on spending, according to a survey released yesterday.
Published annually by Colliers International, the survey tracks annual retail rents - in terms of US dollars per square foot - along the prime retail corridors of 127 cities in North America, Europe, the Middle East and Africa, the Asia-Pacific and Latin America.
Singapore's Orchard Road remained the 28th most expensive place in which to rent retail space. Annual retail rents there fell to US$324 psf in the latest survey, from US$367 psf a year earlier. But the worldwide slide in rents meant Orchard Road retained its ranking.
Fifth Avenue in New York topped the global chart again this year with annual retail rents of US$1,400 psf, followed by the Champs Elysees in Paris at US$1,203 psf and Causeway Bay in Hong Kong at US$1,192 psf.
'As in other cities, as the financial crisis deepened and Singapore's economy slipped into a recession in the final quarter of 2008, domestic consumers tightened their belts on fears of rising unemployment and wage cuts,' said Tay Huey Ying, Colliers' director of research and advisory. 'Declining visitor arrivals also affected retail sales.'
Amid the less favourable operating environment, tenants became more selective and rent-sensitive, Colliers said. Coupled with the supply of retail space in the pipeline, Singapore's prime retail rents started to buckle in Q4 2008.
But although rents in Singapore are falling, they are not falling as fast as those elsewhere. Due to their relative resilience, and the relative strength of the Singapore dollar against the US currency, Singapore's prime retail rents recorded a milder decline of 12 per cent in US dollar terms compared with rents in some other Asia-Pacific cities.
'What this means is our retail competitiveness against our more costly neighbours has been eroded,' Ms Tay said. 'For example, while Singapore's premier retail rents were 18 per cent cheaper than those in Sydney and Melbourne in 2008, the gap has now narrowed to just 3 per cent in the latest survey.'
By the same token, Singapore's competitiveness against cheaper neighbours - such as Auckland, Bangalore, Christchurch, Delhi, Perth and Wellington - has worsened because the gap in rents has widened.
Colliers expects prime retail rents in Singapore to fall between 10 and 15 per cent in 2009, hit by weak consumer sentiment and falling visitor arrivals.
Source: Business Times, 3 June 2009