Super-prime Orchard mall rents hit record $54.40 psf

July 9, 2008
Super-prime Orchard mall rents hit record $54.40 psf
5.3% increase qoq is highest of all retail micro markets tracked by
CBRE
By ARTHUR SIM

CHANEL, Gucci, Louis Vuitton are big brands that scream 'high
fashion' on Orchard Road.

But lately, the screams are more likely to be the painful result of
rising rents.

CB Richard Ellis (CBRE) said that super prime retail space - defined
as space facing Orchard Road or in atriums - hit a record $54.40 per
square foot (psf) per month in the second quarter of this year.

This was an increase of 5.3 per cent quarter on quarter (qoq) - the
highest of all retail micro markets tracked by CBRE.

For the whole Orchard Road area, rents rose 1.1 per cent qoq in the
second quarter to average $36.80 psf per month - also a record.

The 'uncertain global business climate and imminent supply coming on
stream' now has retailers making more prudent decisions on space,
said CBRE. But 'there remains an appetite for expansion and retailers
are still keen to bring new brands into the market'.

An estimated 6.9 million sq ft of retail space will be completed
between the third quarter this year and 2012, with 48 per cent of
this coming on stream in 2009.

But still, said CBRE: 'We continued to see new entrants and openings
in Q2.'

It noted that Wisma Atria houses Jayson Brunsdon, Trois + Inch and
Levis Lady.

Thai fashion label Greyhound and Playhound is now available at Tangs
Orchard.

And Toshin will introduce eight new stores totalling 15,000 sq ft at
Takashimaya.

Of course, as new shops open, others close.

Wing Tai Retail will close two Topshop and Topman outlets in the
Orchard/Scotts Road area because the leases have expired.

The 12,000 sq ft Wisma Atria outlet will close this month and the
2,500 sq ft outlet at Isetan Scotts will close at the end of August.

Wing Tai will open a new store of more than 4,000 sq ft at an
undisclosed Orchard Road location later this year and expects to open
a 12,000 sq ft flagship store at ION Orchard when the mall is ready.

WingTai Retail executive director Helen Khoo said: 'We have been
looking for a suitable location for our new Topshop and Topman
flagship store in the Orchard Road area, and are preparing for
opportunities arising from a new retail landscape.'

Rents were not cited as a reason for the relocation. But rents at ION
Orchard have been reported to range between $20 and $60 psf per month.

Singapore Retailers Association (SRA) executive director Lau Chuen
Wei believed that high rents are 'putting a dent in retailers' bottom
lines'.

'Retailers have to work out their sums very carefully and make
location decisions depending on affordability as well as what market
segments they want to attract,' she said.

'Several new developments are coming on stream, but there is no
lowering of rents in sight,' she added.

Ms Lau said that properties offering the new space have 'clear ideas'
of their positioning and what kinds of retailers they want within
their properties.

Likewise, there are retailers who are very clear about where they
want to be. 'It's a matter of negotiation - and who wants who more,'
she said.

Knight Frank also suggested that retail rents may not suffer from
future over-supply.

In a research brief, it said that Singapore had 7.4 sq ft of
available retail space per person (capita) at end-2007, compared with
Hong Kong's 16.2 sq ft per capita.

Based on current population growth, Knight Frank reckoned that the
Singapore retail sector may have the capacity to grow by four million
sq ft in the next three years to get close to the 2004 level of 7.97
sq ft per capita.

It reckoned that a rise in retail sales over the next three years,
from $650.60 psf in 2007, will outpace the increase in retail space
to sustain growth in space productivity at close to $700 psf in 2010.