Orchard Road in Singapore Ranks 27th as the Most Expensive Retail Street Worldwide

International property consultant, Colliers International’s latest survey on global retail rents revealed that international and luxury brands are expanding into new markets, with properties located along high streets growing in popularity.  

Published on an annual basis, the 2013 global survey tracked annual retail rents (US$ per sq ft per year) of the world’s prime retail corridors across 129 cities in North America, Europe, Middle East and Africa (EMEA), Asia Pacific and Latin America.

According to the survey findings, the first half of 2013 saw the retail market worldwide rebound – with increasing sales around the world, growing rents in highly coveted locations and rising demand for retail presence in key tourist destinations. 

Fifth Avenue in New York remained as the world’s most expensive retail street commanding a whopping high rent of US$3,052 per sq ft per year.  Queen’s Road Central and Canton Road in Hong Kong took the second and third positions, fetching rents at US$2,086.73 per sq ft per year and US$1,993.98 per sq ft per year, respectively.  

Asia’s Performance

Out of the top 10 most expensive retail streets worldwide, 3 were from Asia – Queen’s Road Central, Canton Road and Causeway Bay in Hong Kong.  

Retail sales in Hong Kong have rebounded from the lows of 3Q 2012 – with the arrival of a total of 12.5 million inbound visitors during the three-month period ending May 2013, an 11.8 per cent year-on-year increase.  

Mr Simon Lo, Executive Director of Research & Advisory | Asia, Colliers International, says, “In addition to the contribution by tourist spending, strong local private consumption is another factor underpinning the retail industry in Asia – especially in emerging markets such as China and the ASEAN countries, including Indonesia, Thailand and The Philippines, among others.”  

He continues, “And because the Asian countries are facing a decentralisation trend, of which more people are moving away from core locations where living costs are now higher and places have become overcrowded, retailers are attracted to extend their locational coverage in order to capture the growing retail needs in the fringe urban areas. This creates new opportunities for sustained development of the retail sector in Asia.” 

Singapore’s Performance 

Singapore ranked 27th worldwide, with rents of prime retail space along Orchard Road averaging at US$355.39 per sq ft per year. 

The gross rents of prime ground floor retail space in Orchard Road slipped by four per cent in 1Q 2013 over the same quarter in the previous year.  The dip was because some older malls in Orchard Road have yet to undergo upgrading or any form of refurbishment, as well as increasing competition from sub-urban malls. 

Nonetheless, average rents of prime ground floor retail spaces in Orchard Road remained 10.1 per cent higher than those in the Regional Centres.  

On a quarter-on-quarter (QoQ) basis, as of the end of September 2013, the average monthly gross rents of prime retail space in Orchard Road stood at S$36.38 per sq ft (US$28.99* per sq ft), while those in the Regional Centres were S$33.46 per sq ft (US$26.67 per sq ft).  

Going forward, shopping malls in Orchard Road and the Regional Centres are expected to still maintain tight occupancy rates, as retailers who are looking for expansion and new-to-Singapore brands continue to make inroads into the city to capitalise on its fast growing international profile.  

Retail rents are expected to remain stable, with the continued momentum of new openings and setups in many of the popular and well located malls.  In Orchard Road, new malls would largely be able to maintain their rental levels, but older malls could have their rents come under pressure. 

Ms Chia Siew Chuin, (谢岫君), Director of Research & Advisory, Colliers International, says, “On a QoQ basis, given that there was already a decrease of 2.3 per cent in the first 9 months of this year, rents of prime retail shops in Orchard Road is forecast to end the year with an overall annual decrease of not more than 3 per cent.  

At the same time, given that there was only a slight increase of 0.1 per cent in the first 9 months, rents of retail space in the Regional Centres is still 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 (US$26.60 per sq ft per month).” 

Key Trends in Retail Property Markets in Asia in 1H 2013 

  • Mainland tourists still shopping strong in Hong Kong: Hong Kong’s retail market continues to benefit from the strong tourism performance, which is particularly underpinned by the visitors from mainland China.  Many retailers, especially those in the fashion, watch and jewellery sectors, have opened flagship stores in prominent locations throughout the city. However, in view of narrowing profitability in the city amid soaring rents and increasing labour costs, some retailers are now considering bypassing Hong Kong and entering China directly.   Overall, rents of street-level shops in key shopping districts are forecast to grow by 8 per cent over the next 12 months. 
  • Largest global flagships find a home in Shanghai: The retail sales in Shanghai increased by 9.1 per cent YoY in 1H 2013.  On the demand side, the market continued to see expansion and leasing activities by many retailers. For example, several brands including Uniqlo, Shanghai Tang Cathay Mansion, Breguet and Ernest Borel have opened their largest global flagship stores in Shanghai.  In 2Q 2013, the average fixed rents for ground-floor shops edged up by 1.07 per cent QoQ.
  • Beijing retail spending growth slows but still remains strong: Beijing’s retail sales increased by 8.8 per cent YoY in 1H 2013.  Though the figure still indicated a strong growth, it was 4.2 percentage points less than the same period in 2012.  While some brands have slowed or even suspended their expansion plans, there are still many active players of international brands – including Calvin Klein, Trussardi, GANT, Brooks Brothers, among others – which signed new leases in the city.  The average fixed rents of ground-floor retail space in Beijing’s mid- and high-end shopping centres increased by 0.9 per cent QoQ in 2Q 2013.  
  • Japan sees fast fashion brands’ openings in Ginza and Omotesanda: Japan has experienced three quarters of GDP growth since 4Q 2012, with resilient private consumption and improving consumer sentiment. The fast fashion trend takes off with openings of labels such as Zara, H&M, Forever 21 and Uniqlo in Ginza and Omotesando.  According to the survey findings, rents on Chuo-dori in Tokyo’s Ginza district remained unchanged. 
  • Relaxed foreign investment regulations set stage for new brands in India: Organised retail, which includes all standardised brands and chains, accounts for less than 10 per cent of the total retail market.  However, it is likely to increase to about 15 per cent in the next 5 years. The recently-relaxed government regulations will allow 100 per cent foreign ownership of single brand international retailers and up to 51 per cent for multi-brand retailers, in an effort to attract big global players to the country. Rents of retail space in the high streets are expected to remain stable in the coming quarters, with the possibility of rents in malls growing, as more international retailers move into the country.  

Key Trends in Retail Property Markets in Other Regions in 1H 2013 
  • Luxury and international brands expand in Australia and Brazil: Australia’s central business districts (CBD) in Sydney and Melbourne have been revived with the introduction of many major international brands such as Zara, Apple and Topshop, along with luxury retailers. Pitt Street Mall in Sydney’s CBD is ranked as having the ninth most expensive rent globally. The largest development, The Emporium in Melbourne’s CBD, will have space for nearly 200 new retailers. 
  • Similarly in Brazil, many retailers planned expansions based on a nearly 9 per cent YoY sales growth in 2012, but that trend has not continued in 2013. The Brazilian Association of Franchising reports 122 new retail centres will be built in the next 5 years. Rents of high street space in Brazil are the most costly in Latin America, with a 15 per cent growth over the previous year seen in Sao Paulo’s luxury shopping street – Rua Oscar Freire. 
  • Online shopping gains popularity in the UK: Online shopping is on the rise throughout the United Kingdom; but in London, retailers are realising the importance of keeping a brick-and-mortar presence in key retail destinations.  Demand for flagship space continues to outpace supply – resulting in retail growth on the city’s outskirts, including core West End locations such as South Moulton Street and Dover Street, where YoY rents have grown 20 per cent and 5 per cent, respectively.
  • US high street rents continue to climb: Popular retail destinations in major metro areas are seeing a huge increase in rents. In New York, rents on Fifth Avenue increased by 11 per cent from the previous year— the most expensive in the world at US$3,052 per sq ft per year. In Las Vegas, rents on the Boulevard increased by 25 per cent. Although US consumer retail spending continues its upward trend, major discount retailers such as Walmart and Kohl’s, have shown little growth. 
* Exchange rate based on US$1 = S$1.2547