The most recent report of CB Richard Ellis (CBRE), a multinational real estate firm, shows that the prime retail rents in Orchard Road continue to slide down as it fell 3 percent quarter-to-quarter in Q3 of 2009 to $32.90 per sq. ft. per month (psf pm).
The said report is in line with the fall of 2.9 percent quarter-on-quarter in the Orchard Road prime rents seen in the second quarter.
However, during the rental trend’s turnaround, the suburban prime rents slightly inched up to 0.7 percent quarter-on-quarter as it gained an average of $28.50 psf pm in this year’s third quarter. The slight increase was driven by the competition for the limited availability in the area. With this, the CBRE is now expecting that the suburban prime rents this year will contract by 1 to 2 percent, compared to the 2 to 3 percent contraction that was estimated earlier.
On the contrary, CBRE maintains its forecast for the whole year, wherein the prime rents in Orchard Road will have a decline of 10 to 12 percent. It also includes an additional decline of less than 5 percent, which is expected for the following year. The firm said that the final rental trough for the prime Orchard Road retail rental space should have a level of not less than $30 psf pm.
“The last time Prime Orchard Road rents fell below $30 psf pm was from 1998 to mid-2000, when the effects of the Asian Financial Crisis were most felt”, stated CBRE. “Since the turn of the millennium, prime Orchard Road rents have shown a certain resilience. Even during the global electronics downturn and Sars in 2002/2003, these rents did not dip below $31.50 psf pm”.
The firm also stated that in the end of the third quarter, the leasing activities in the new Orchard Road rental space have relatively stabilised and many of the tenancies have given their commitment.
Mandarin Gallery is nearly 100 percent occupied before its pre-Christmas opening. Another establishment, Knightsbridge, has announced its 50 percent pre-committed and is even expected to finalise its remaining leased by the third quarter of this year. TripleOne Somerset is also now 60 percent pre-lease, while 313@Somerset, located on the opposite side of the street, announced its 90 percent lease even before its opening in November.
Two other primary malls in Orchard Road, Orchard Central and Ion Orchard, are now open for business; though, both malls are not yet fully leased according to the last provided updates.
CBRE’s retail services director Letty Lee said that in 2010, two upcoming resorts will provide locals and visitors another two new and distinctive shopping destinations.
“A line-up of old and new international brands along with local offerings and emerging labels is widely expected”, said Lee. “The developments will reach out to a more cosmopolitan clientele, and is likely to offer a different shopping experience from what we have encountered locally so far. It is an exciting time for the retail scene”.