Buzz on Orchard Rd as Ion rents hit $80 psf

July 23, 2008
Buzz on Orchard Rd as Ion rents hit $80 psf
Luxury retail rentals enter unfamiliar territory with new benchmark
By ARTHUR SIM

(SINGAPORE) A new benchmark for retail rents on Orchard Road has been
set at Ion Orchard with tenants paying a base rent of up to $80 psf
per month. This is 60-80 per cent higher than the current average
prime, first-storey Orchard Road rents.

Orchard Turn Developments CEO Soon Su Lin also revealed that Ion
Orchard, a joint project of CapitaLand and Sun Hung Kai Properties,
is now 50 per cent leased, with more than 30 per cent of the
retailers setting up flagship stores.

'We have to-date, 45 confirmed new-to-market brands and newly created
concepts by established operators,' she added.

Ms Soon was speaking at a press conference to announce its newest
tenants as well as to reveal Ion Art - an art and design programme
which will introduce new and multi-media art into the 'integrated
mall experience'.

With less than a year to go before Ion Orchard opens, Ms Soon said
that the construction is still on schedule. Ms Soon did not reveal a
fixed date for completion, but said that the mall will open in time
for retailers to showcase their Spring/Summer '09 collections.

While luxury retailers at Ion Orchard like Louis Vuitton and Prada
are going to have to sell a lot of handbags and shoes to cover the
luxury rents, sources say that $80 psf appears to be the new asking
rent for prime space at other new malls including Orchard Central.

DTZ Debenham Tie Leung senior director (research) Chua Chor Hoon
believes that while it appears that a new benchmark has been
set, 'the $80 psf rental rate is likely to apply only for very prime
shop units on the ground floor with good frontage'.

According to DTZ, the current average for prime, first-storey retail
space in Orchard Road/Scotts Road area is $42.40 psf per month and
$23.80 psf per month for prime upper storey retail space.

But Ms Chua did add: 'For a new mall like Ion, sitting on top of the
MRT station and sitting at a busy junction, the average rent would be
higher.'

Rents at Ion Orchard do start at $20 psf per month and this is likely
to be for units at the basement levels, which will include F&B
outlets and bridge brands.

Still, Knight Frank director (research and consultancy) Nicholas Mak
says that even at $20 psf per month, some tenants, especially those
in F&B, could find the going tough.

As such, Mr Mak notes that while the Ion Orchard is 50 per cent
leased, 'Some could ask if the glass is half full or half empty'.

According to Knight Frank, current prime, first-storey rents are
about $49 psf per month on Orchard Road and Mr Mak adds that only big
luxury fashion and jewellery stores can afford rents at this level.

Mr Mak does, however, point out that not all retailers need to be
location specific. 'Mid- and mass-market brands can go to any of the
new malls coming up along Orchard Road. There will also be landlords
competing for certain types of tenants.'

Ms Chua adds that retailers will need to weigh the pros and cons of
where they choose to locate their shops. 'The positioning of the
mall, variety and type of tenants, advertisements, events,
promotions, layout and design concept of the mall will help to pull
in crowds,' she says, adding: 'Tenants that require high shopper
traffic will mainly be the ones who will not mind paying the higher
rentals or a percentage of their turnover, if the traffic volume
would translate into higher revenue for them.'