While Non-luxury and Fast-fashion Retailers Expand into the Sub-urban Areas, New-to-market Brand Names Make Foray into Orchard Road and Central Locations
International property consultant, Colliers International’s latest quarterly research revealed that rents of prime retail space in sub-urban locations remained relatively stable in 2Q 2013, while those in the Orchard Road shopping belt fell marginally across the same period.
As of the end of June 2013, the average monthly gross rents of prime retail space in the Regional Centres1 gained a slight 0.1 per cent – from S$33.38 per sq ft in the preceding quarter to S$33.42 per sq ft in 2Q 2013.
Comparatively, the average monthly gross rents of prime retail space in Orchard Road declined by 0.9 per cent – from S$36.75 per sq ft in 1Q 2013 to S$36.42 per sq ft in 2Q 2013.
Consequently, the rental premium that prime retail space in Orchard Road commands over similar space in the Regional Centres narrowed further from 10.1 per cent in 1Q 2013 to 9 per cent in 2Q 2013.
Mr Calvin Yeo (杨光伟), Deputy Managing Director at Colliers International, says, “The continued narrowing of rental gap in retail space between the Regional Centres and Orchard Road indicated that malls in the Regional Centres are gaining a firmer foothold in the retail property scene; particularly, given the immediate catchment area of the nearby neighbourhoods.
In fact, we see many retailers from the non-luxury and fast-fashion sectors, who have typically been in Orchard Road and the more central areas, expanding into the sub-urban locations – with a view to bringing the accessibility of Orchard Road shopping into the heartlands, as well as developing decentralised commercial centres around the island.”
For instance, as many as 59 retailers in Jem, the newly-opened mall in the Jurong East Regional Centre, made their first foray into the sub-urban areas. Some of these tenants included H&M, Kinokuniya, Marche Bar & Bistro, Paris Baguette, Robinsons, Sephora, Shu Umera and Victoria’s Secret, among others.
Mr Yeo adds, “Nonetheless, malls in Orchard Road and the other central areas are still enjoying bustling activities with a fair share of new-to-market brands making their debut in the quarter.”
For instance, Wisma Atria in Orchard Road has secured three new-to-Singapore brands – including French lingerie label – Etam, which has opened since May; Hong Kong cutting-edge multi-label fashion conglomerate – i.t, which has opened since June; and Italian womenswear label – Liu.Jo, which will be opening in July. Paragon Shopping Centre has also welcomed Spanish fashion label – Adolfo Dominguez, which has opened its first boutique in Singapore since April.
Over at the secondary Central Business District, The Shoppes at Marina Bay Sands saw in May the opening of luxury handbags and accessories label – Lana Marks.
The strata-titled retail sales market remained buoyant in 2Q 2013, with demand from both individual and institutional investors.
For example, 65 of the 107 retail units in The Midtown, a new 12-storey mixed development developed by Oxley Holdings and Lian Beng, were reportedly snapped up during the project’s preview. Meanwhile, Wen Way Investments Pte Ltd reportedly purchased all 22 retail units at The Sail@Marina Bay for S$105 million, which works out to S$4,582 per sq ft based on the total strata area of 22,916 sq ft.
With investment interest in retail units being robust during the quarter, capital values trended steadily upwards.
The average capital value for prime strata-titled retail space in Orchard Road increased 2 per cent to S$6,942 per sq ft in 2Q 2013 from S$6,806 per sq ft in 1Q 2013. Comparatively, given the mounting interest in retail space in decentralised locations, the average capital value for similar space in the Regional Centres improved by 4 per cent quarter-on-quarter to S$4,447 per sq ft in 2Q 2013 from S$4,276 per sq ft in the preceding quarter.
Going forward, based on the performance of retail sales by far, consumer sentiment is expected to remain on the side of caution. Nonetheless, many shopping centres along Orchard Road and in the Regional Centres are expected to still maintain tight occupancy rates, as new-to-Singapore brands continue to make inroads into the Republic to capitalise on her fast-growing international profile.
Given the continued momentum of new openings and setups in many of the popular and well located malls, retail rents are expected to remain stable.
Ms Chia Siew Chuin (谢岫君), Director of Research & Advisory, Colliers International, says, “New malls in Orchard Road would, by and large, be able to maintain their current rental levels; but older malls – particularly those that have not been refurbished – are likely to have their rents come under pressure. Therefore, any downside movement of rents for retail space in Orchard Road is expected to be capped within 5 per cent for the whole of 2013."
Meanwhile, rents of retail space in the Regional Centres are expected to remain stable until the end of 2013 – near the level recorded in the beginning of the year at S$33.38 per sq ft per month.
Given that there are limited new launches and retail units in popular locations, prices of existing strata-titled retail units are expected to increase.
Ms Chia adds, “Barring any policy measures from the government that might dampen the commercial sector, the capital value of prime strata-titled retail units in Orchard Road is likely to increase by some 10 per cent for the entire 2013. Comparatively, capital values of prime strata-titled retail units in the Regional Centres are expected to see an increase of at least 15 per cent by the end of 2013.”
- Regional Centres refer to a second-tier decentralised commercial zone after the main central business district in the Central Area. They are located in three sub-urban districts, namely the Woodlands Regional Centre located at Woodlands in the North Region; the Tampines Regional Centre at Tampines in the East Region, and the Jurong East Regional Centre at Jurong East in the West Region.