Retail rents narrowing between suburbs and Orchard Road, say analysts

Renting retail space at a suburban mall these days may not be very much cheaper than renting one at Orchard Road, say analysts.

Colliers International said the gap between prime retail rents in the two segments have narrowed from 17 per cent in 2009 to 12 per cent this year.

Demand for retail space in suburban malls will continue to be strong, say analysts, citing the improving quality of suburban malls.

Rentals of prime space along Orchard Road are now only 12 per cent higher than neighbourhood malls, at about S$34 to S$37 per square foot on average.

Analysts expect rentals to stay fairly resilient in 2013, even though over two million square feet of retail space is set to come on stream.

Among them, over 400,000 square feet of space will be located in Orchard Road, with the rest located in suburban areas like Jurong.

“So many new international brands are coming in because they see Singapore as a gateway to the growth regions. Landlords will definitely not come down on rent when you get these names coming in,” said Charles Ng, director of Retail Services at Colliers International.

Analysts also said that competition in the retail sector will be keen with newer malls in the market.

However they added that landlords should not have much problems finding tenants as the total vacancy rate is still at a healthy 6 per cent island wide.

Analysts have also pointed out the huge potential for growth in rental and capital value in Jurong East.

“The two new buildings, Jurong Gateway and Jem, will be seeing some relocation of jobs from Shenton Way into Jurong East… You are adding another 10,000 workers there. Within the next three years, the Jurong East retail scene will be significantly changed,” said Ku Swee Yong, CEO of International Property Advisor.

Overall, analysts expect rentals of retail space in Singapore to fall by between 1 per cent and 3 per cent this year, compared to 2011.

Source : Channel NewsAsia – 7 Dec 2012

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