Prime retail rents continue to fall in 2Q2016
By Desmond Sim
/ CBRE |
Average prime retail rents in Orchard and the suburbs tracked by CBRE Research continued to fall in 2Q2016. Average prime Orchard Road rents currently stand at $32.50 psf per month, down 1.1% q-o-q. This marks the sixth consecutive quarter of decline for Orchard Road. Average prime rents for the suburban sub-market fell 0.7% to $29.45 psf per month. This sub-market is relatively more resilient, as prime suburban rents began to fall only in 4Q2015.
The retail sector is still undergoing restructuring. It is currently an occupiers’ market. Rents have certainly remained under pressure but there are still sparks of activity, particularly around well-located and well-managed suburban malls that have a strong positioning tilted towards families and the immediate catchment.
An example is Compass One, the former Compass Point Shopping Centre, which was closed last October for a facelift and asset enhancement and will reopen later this year. It is said to have achieved a 90% pre-commitment rate, and with the positive momentum continuing, it could well achieve full occupancy ahead of its opening.
Malls that are located near transport nodes and have a good tenant mix and guaranteed catchment will continue to be more
resilient in terms of rents and occupancy in the current market climate
Compass One has seen a strong showing from returning tenants, who are attracted to its concept of a family mall. The mall is part of an integrated development and linked to Compass Heights condominium, as well as the bus interchange and LRT/ MRT station in Sengkang.
Malls that are located near transport nodes and have a good tenant mix as well as guaranteed catchment will continue to be more resilient in terms of rents and occupancy in the current market climate.
While general vacancy has been rising and more retail stock can be expected, the availability of prime space in good locations is scarce. This has deterred the expansion and entry of some retail brands as location, visibility and high footfall have become even more important factors than ever, owing to intense competition. With no foreseeable new supply in Orchard Road and Marina Centre in the next few years, at least until 2019, this should provide some support for prime rents in Orchard Road for the next half of the year.
F&B brands continued to be active in Singapore this quarter. Most of the new foreign cafés and restaurants that have either opened or leased space in Singapore originate from Asia-Pacific. They include Honolulu Café and a Japanese food hall concept named Itadakimasu by Parco. Cosmetics, streetwear and footwear outlets are seeing signs of more activity. Flagship stores are also trending, in tandem with the growth of e-commerce and a need to engage consumers more actively.
The market is particularly challenged by a mismatch of demand and supply at this point in the cycle. While most of the limits to expansion stem from consolidation activity, some retailers are constrained by the shortage of quality space.
Desmond Sim is head of CBRE Research for Singapore and Asia-Pacific.
This article appeared in the City & Country, Issue 732 (June 13, 2016) of The Edge Singapore.
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