Orchard Road Rents Nearing Pre-Asian Financial Crisis Peak Of 1996

In a study of prime Orchard Road rents over the last decade, the current rentals in Orchard Road appear to be fast approaching levels in 1996, before the Asian Financial Crisis in 1997. Rents of units on levels with the highest traffic in Singapore’s most popular shopping destination registered an average of $35.10 per square foot per month in 1996. This is close to the figures recorded in the second quarter of 2007, where prime Orchard Road rents registered an average of $34.40 per square foot per month. At this level, it is 47 per cent higher than the average $23.40 per square foot per month recorded at the lowest point in 1998.

Executive Director, Retail Services, Mavis Seow said “The tides have turned in recent years with the strong rebound of the Singapore economy. Efforts to rejuvenate Orchard Road with a lot more vibrancy are beginning to pay off. Landlords are actively seeking out fresh foreign brands to give their shopping centres an international face. Existing brands such as Celine, Chanel and Cartier have also either expanded their range of merchandise or have retrofitted their boutiques. Taken together, these steps are contributing to the buoyancy of the historic shopping belt and a very positive outlook on the part of both retailers and landlords”.

The second quarter of 2007 saw more new brands from Europe, US and Australia setting up shop here. They include Roots from Canada and French brand Promod. Camper will make a come- back with the opening of its new outlet in VivoCity. In recent years Spanish labels have made significant strides in Singapore’s fashion arena. New Spanish entrant Cortefiel will join the ranks of Mango, Zara and Massimo Dutti at the end of the year to become part of the fashion retail scene here. Home- grown retailers are also re- branding, with department stores such as Robinsons expanding their fashion range. Episode, Jessica and Danish fashion chain Cottonfield are now retailing in Robinson stores.

This vibrancy follows a period of hiatus, with little or limited activity in the retail scene. Between 1997 and 2005, Orchard Road prime rents dipped to its lowest, at $23.40 per square foot per month in 1998. This is 47 per cent lower than the current $34.40 prime rent for Orchard Road. Prime Orchard Road rents remained relatively resilient during the SARs period in 2003, in the low thirties at $31.60 per square foot per month.

“Looking ahead for the rest of 2007, we expect prime Orchard Road rents to grow between four and seven per cent, given the lack of new supply in Orchard Road for the rest of 2007, as well as the healthy tourist numbers from Indonesia, Australia and the emerging markets of China and India where people are experiencing rising affluence” added Ms Seow.

Indeed, there is a lot going for Orchard Road. For the past two years, tenders for prime retail sites have generated immense interest, going by the number and value of bids for sites such as Somerset Central, Orchard Turn and Orchard Central. A number of retail properties were also recently put up for sale. Apart from local developers, foreign institutional funds and REITs are among the buyers who would be keen to purchase retail properties for the stable return. Within Orchard Road, Tanglin Shopping Centre, Orchard Towers, Orchard Plaza are reportedly being put up for sale. The indicative prices for these properties range between $670 psf/plot ratio and $2,000 psf/plot ratio.

These milestones have given developers more reason to remain optimistic about Orchard Road’s potential, prompting the current trend of mall revamps and upgrades. Mandarin Gallery is the latest development to undergo a major revamp. The New Mandarin Gallery is set to be a new icon of prestigious shopping along Orchard Road, offering 200,000 square feet of fresh retail offerings over five levels.

Prime rents in Orchard Road have increased steadily in the last two quarters since January 2007. Average prime rents rose 1.8 per cent to $34.40 per square foot per month in the second quarter of 2007, and have increased 2.4 per cent from the second quarter of 2006.

Elsewhere, rentals for revamped spaces at the malls in the City Hall/Marina Centre precinct brought up the average prime rent in the area by 1.4 per cent to $25.90 per square foot per month. This is 4.4 per cent higher from a year ago in the second quarter of 2006 when prime rents averaged $24.80 per square foot per month. Raffles City is pumping in another 41,000 square feet of retail space by the end of 2007. Suntec City is in the midst of creating new shopping zones with the aim of giving its various profiles of shoppers a total shopping experience. In addition, Suntec Convention Centre has recently incorporated a brand new avant garde food court, operated by Food Republic. The 15,000 square feet eatery is modeled after a gentleman’s library from the 19th Century.

Since CB Richard Ellis - http://www.cbre.com.hk - was first established in Hong Kong in 1978, the company has grown to become one of the leading International Property Consultants in Greater China.