Some 1.1m sq ft of retail space will be added to Orchard Rd this year, bumping up supply in the prime shopping belt by 24%
THE retail scene appears to be regaining some momentum after a quiet first quarter, thanks in part to the Great Singapore Sale, the opening of Ion Orchard and Orchard Central, and news about the high pre-commitment levels in upcoming malls. With the opening of Orchard Central and Ion Orchard, some 613,548 sq ft of space has been added to private stock along Orchard Road.
This represents a 15.7 per cent increase to private Orchard Road stock in Q2 this year. As a result, the occupancy rate for Orchard Road dropped 11.5 percentage points from 95.3 per cent in Q1 2009 to 83.8 per cent in Q2. Average rents in the Orchard Road basket of prime retail space that CBRE tracks saw a 2.9 per cent dip quarter-on-quarter. As at H1 2009, prime Orchard Road rents have fallen 6 per cent.
There is no doubt that retailers are increasingly being challenged by the economic downturn that is driving down tourist numbers and local spending. Coupled with high overhead costs, retailers face the prospect of not being able to achieve their projected turnover. But this is probably a short term view of the situation. Fundamentally, there are factors working in favour of retailers.
Market talk has also been rife with concerns about supply looming in the two new integrated resorts (IRs) and how it would impact rents in Orchard Road and the rest of Singapore. Again, the concern of over-supply may be premature. Continue reading
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