Orchard road malls going for frequent facelifts

Shopping malls along Orchard Road are going for facelifts even though they are relatively new, due to rising competition from brand-new shopping centres – which are forcing the existing ones to spruce up their act.

Instead of refurbishing a shopping centre after a decade or two, mall owners are tweaking the look and feel of even relatively new buildings.

Analysts say this is because the ownership of many shopping centres has changed hands, and the new landlords are real-estate investment trusts that want to earn high rental incomes to keep their investors satisfied.

Head of research for Jones Lang Laselle (SEA), Dr Chua Yang Liang says the arrival of real-estate investment trusts (REITs) have made mall operators more aggressive.

“Because at the end of the day, you have your major shareholders, it’s about income returns on the asset itself, so there is motivation to make sure their assets are viable and continue to attract the tenants”, said Dr Chua.

Wisma Atria shopping mall on Orchard Road will be getting a facelift by the third quarter of next year.

It is owned by Starhill Global REIT, which plans to enhance the mall’s positioning by redeveloping its frontage.

Meanwhile, CapitaMall Trust has announced asset enhancements initiatives in Atrium@Orchard.

Analysts say the trend is likely to continue.

“So there is that change in structure, and definitely going forward, I think you may see the retail scene, especially along Orchard Road changing along towards that direction”, said Dr Chua.

“Where the lifespan of the building becomes shorter, and the need to upgrade becomes more pressing.”

Following the launch of several new malls along Orchard Road over the last two years – such as the Knightsbridge at Grand Park Orchard hotel, Ion Orchard, Orchard Central and 313@Somerset – analysts expect the premier shopping belt to see less new addition of retail space next year.

“There is already a fair amount of malls and that have already cropped up. So after this round of refurbishment, the situation will probably stabilize over the next couple of years”, said Mr Wong Sui Jau, general manager of Fundsupermart.

Currently, the monthly gross rent in the Orchard Road area is between S$20 and S$40 per square foot.

According to Jones Lang LaSalle, prime rents have risen 1 per cent over the past one year.

Source : Channel NewsAsia – 2 Mar 2011

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