Retail rents hold steady despite new supply

RETAIL rents across most of Singapore held steady in the first quarter of this year, a new report showed.

This ended five straight quarters of decline in some areas, as tourist arrivals grew and consumer confidence rose, according to the report by DTZ Research.

In the premier shopping belt of Orchard Road/Scotts Road, retail rents remained constant as the market absorbed new supply that came onstream in the first quarter of this year.

Gross rents of prime first- and upper- storey retail space in this area stayed at $39.70 and $20.50 per sq ft (psf) a month respectively in the first quarter.

More supply is due this year, though the estimated 2.3 million sq ft of new retail space expected this year is 15 per cent less than the historic high of 2.7 million sq ft last year, according to DTZ Research. A flurry of activity last year saw the addition of prime Orchard Road malls such as Ion Orchard, Orchard Central, 313@Somerset and Mandarin Gallery.

This year’s new supply will include the space at The Marina Bay Shoppes, Nex in Serangoon Central, Knightsbridge at Grand Park Orchard hotel, Bedok Point and Clementi Mall.

Retail rent in other city areas – Marina and Bugis, Beach Road, Bras Basah and North and South Bridge Roads – held steady after five straight quarters of decline. Gross rents of prime first- and upper-storey retail space in these areas stabilised at $24.40 psf and $14 psf per month.

In suburban areas, retailers’ resistance to high rents was reflected in a marginal drop of less than 3 per cent during last year’s downturn, said DTZ Research.

Monthly gross rents held firm in the first quarter at $33.50 psf a month for prime first-storey suburban space and $22.80 psf a month for upper-storey suburban space.

At the end of the first quarter, islandwide retail space stood at 32.8 million sq ft, with the completion of TripleOne Somerset, Scape in the Orchard area and Festive Walk at Resorts World Sentosa.

‘As tourist arrivals are expected to grow and local consumption improves, demand for retail space is likely to increase,’ said Ms Chua Chor Hoon, head of DTZ South-east Asia research.

‘On the back of a brighter outlook for the retail industry, prime retail rents are expected to rise moderately by around 2per cent to 5 per cent this year.’

Source: Straits Times, 23 Mar 2010