Orchard Road in Singapore ranks 25th as the most expensive retail street worldwide.
International property consultant, Colliers International’s latest survey on global retail rents concluded that the most desirable retail spaces worldwide continued to show high year-on-year (YoY) rental growth. This is despite continued global economic uncertainty, which impacted overall market sentiment.
Published on an annual basis, the 2012 global survey tracked annual retail rents (US$ per sq ft per year) of the world’s prime retail corridors – from 1Q 2011 to 1Q 2012 – across 129 cities in North America, Europe, Middle East and Africa (EMEA), Asia Pacific and Latin America.
The survey reflected that the world’s priciest retail corridors continued to attract the most sought-after tenants at loft rents.
Fifth Avenue in New York emerged first as the world’s most expensive retail streets at a whopping US$2,633 per sq ft per year. Both Queen’s Road Central and Canton Road in Hong Kong came in second at a tie, commanding rents at US$1,831 per sq ft per year. Old Bond Street in London took the fourth position at US$1,601 per sq ft per year.
Retailers entering new markets – both developed and developing – continued to hedge risk by targeting the same one or two premier locations, generating heated competition and hefty rental growth in these space-constrained corridors.
Consequently, average rents in 6 of the top 10 retail districts grew at double-digit levels YoY in local currency units, with 5 of them growing by more than 20 per cent.
The five premier retail corridors that enjoyed more than 20 per cent growth YoY include Fifth Avenue and Madison Avenue in New York Queen’s Road Central, Canton Road and Causeway Bay in Hong Kong.
For Asia retail markets, other than the retail streets in Hong Kong which make to the global top 10 list, Ginza-Chuo Street in Tokyo, Orchard Road in Singapore and Nanjing Road West in Shanghai ranked 14th, 25th and 31st, respectively, on the global scale.
Retail rents of most Asia locations surveyed either witnessed growth or stayed flat. Hong Kong, Beijing and Bangalore were the most resilient cities which registered double-digit increase.
Singapore ranked 25th worldwide, with rents of prime retail space along Orchard Road averaging at US$364.76 per sq ft per year. This was a notch up from our 26th position recorded for the last survey conducted in 2011.
The improvement in ranking was despite prime rents in Orchard Road easing by 0.2 per cent YoY in USD terms. In local currency terms, rents for retail space in Orchard Road were down by 0.5 per cent YoY to S$459.60 per sq ft per year as of 1Q 2012.
Mr Charles Ng, Director of Retail Services of Colliers International, says, “The ascent in Singapore’s ranking by a notch, despite an ease in rents over the last review period in 1Q 2011, was due mainly to the strengthening of the Singapore currency against the US dollar.
In recent years, the retail scene in Singapore has become more vibrant, with many new-to-market brand names – such as Abercrombie & Fitch, Anne Fontaine and Franc Franc, among others – opening their first outlet here. This is attributed to Singapore’s evolving status as a cosmopolitan city on the world map, which has caught the attention of businesses worldwide that are looking for localities for their expansion plan.”
On a quarter-on-quarter (QoQ) basis, prime rents of retail space in Orchard Road remained unchanged in 1Q 2012 at S$38.30 per sq ft per month. In 2Q 2012, however, rents eased 1.9 per cent QoQ to S$37.58 per sq ft.
Mr Ng comments, “The ease in prime retail rents in Orchard Road in 2Q 2012 could be attributed to several factors; one of which included the tight labour market which led some retailers and food and beverage operators to shelf their expansion or new set-up plans.
Additionally, tenants are observed to be more selective in the space they take up – taking into consideration the volume of pedestrian flow and position of shops in the malls. Landlords are also looking to create and maintain the retail identity and concept of their malls by stringently controlling the tenant mix. Consequently, the market experienced inertia on further rent increases.”
Looking ahead, top retail corridors with strong fundamentals will remain generally resilient. However, the current weakening consumer sentiment among affluent shoppers has already begun to impact retailers’ revenues; and hence, this may suggest flattening growth rental rates for the rest of the year.
Ms Chia Siew Chuin, Director of Research & Advisory at Colliers International, concludes, “Retail rents in Singapore will continue to be weighed down by competition for tenants, amid an increasingly-challenging operating environment.”
Ms Chia continues, “Nonetheless, sustained retail sales growth should continue to keep up retailers’ confidence and prop up demand for retail space. Coupled with Singapore’s status as a cosmopolitan city and a gateway to Southeast Asia, more retail brands or new-to-Singapore retailers will be attracted to make inroads into the Republic.
Consequently, any downward rental movement should be marginal – keeping to within three per cent to five per cent for the whole of 2012.”