Rental rates in Orchard, Scotts Rd expected to fall

Rental rates for shops in the prime Orchard/Scotts Road belt dropped in the first quarter from a year earlier, and will continue to slide in 2012, according to industry researcher, DTZ.

It said an expected moderation in tourist arrivals, tighter labour supply and more properties coming on-stream will all act to soften the retail rental market.

It forecasts rents will fall by two per cent to four per cent in 2012.

The average gross fixed rent of first-storey retail property in the Orchard/Scotts belt fell by 0.2 per cent to S$40.10 per square foot per month in the first quarter from a year earlier, said DTZ.

“Retailers are facing a tighter labour market which may restrict their capacity to expand operations and take up new space,” according to DTZ’s analysis.

“Retailers also have to contend with rising oil prices, which may affect the cost of goods and profitability.”

Chua Chor Hoon, Head of DTZ Asia Pacific Research, said: “The government’s measures to cool the residential sector and warnings against unauthorised use of industrial space are directing more investor interest to the retail sector which has relatively little space available for sale.”

“Retail yields are thus expected to fall as rents come under downward pressure,” Ms Chua said in a statement.

The conversion of offices to retail space at the [email protected], the completion of orchardgateway and the redevelopment of 268 Orchard Rd are expected to add an equivalent of five per cent of current retail space.

Still, DTZ said prices of first-storey retail space in the Orchard area rose 2.0 per cent in the first quarter, despite the slowdown in the economy. It cites a limited supply of properties on sale.

Source : Channel NewsAsia – 28 Mar 2012