Slide in prime retail rents levels off in 3rd quarter

RENTS for prime retail space began to stabilise in key global markets in the third quarter after falling during the worldwide downturn.

New York, Hong Kong and Paris maintained their top three places as cities with the highest prime retail rents. Singapore inched up one notch from the second quarter to 18 in the top 20 rankings.

Prime retail rents here were estimated at US$448 (S$619) per square foot per year, while in New York the same space cost US$1,640.

Rents in most Asian cities either declined at a slower rate, stabilised or showed a slight uptick in the third quarter, said CB Richard Ellis (CBRE), which compiled the rankings.

Singapore retail rents across the market fell just 0.9 per cent in the third quarter after falling by 2 per cent in the second quarter this year, according to the Urban Redevelopment Authority.

But Mr Peter Gold, CBRE's head of cross-border retail in Europe, the Middle East and Africa, said suburban areas are not faring so well.

'Prime retail rents in the top locations are generally quite stable and able to attract tenants, but secondary locations and smaller markets are experiencing rising vacancy, reduced retailer demand and falling headline rents,' he said.

Singapore's situation could be altered by the number of new malls being built, which will increase the supply of retail space and so put pressure on rents.

A recent report by DTZ Research found 500,000 sq ft of new retail space is expected to hit the market before the end of the year. This will bring the total retail space completed this year to about 2.6 million sq ft, the highest level seen.

This year has seen many changes on the retail front, particularly on Orchard Road with the opening of Ion Orchard and Orchard Central. Mandarin Gallery reopened last month while 313@Somerset makes its debut this week.

Sentiment about the retail landscape is mixed.

Property firm DTZ earlier reported that despite the rise in investment activity, retail spending remains weak and would depend on the extent of economic recovery. It expects retail rents to drift along with minimal decline for the rest of this year and next year.

CBRE's outlook for next year is more bullish. In a separate report, it predicts that the opening of the integrated resorts will draw in a line-up of old and new international brands against a backdrop of convention facilities, theme parks, hotels and other leisure amenities, all of which will perk up the retail scene.

Source: Straits Times, 1 Dec 2009