Retailers' race for space spikes rents along Orchard/Scotts Road

The average gross rent of prime first-storey space in the area increased by a marginal 0.3% q-o-q from $39.70 per sq ft per month in Q3 2010 to $39.80 per sq ft per month in Q4 2010.

The rents jumped  in Q410 after staying flat for four quarters straight.

In a statement, DTZ Research said that the opening of five major malls in 2009 and 2010 in the Orchard/Scotts Road area gave rents a boost as demand catches up with supply.

The firm said there will be little new supply coming on-stream in 2011and 2012 along the premier shopping street as new commercial areas have just been unveiled.

"The increase in rent, albeit marginal, shows that retailers are optimistic of business prospects in line with economic recovery. Orchard/Scotts Road as a prime shopping district continues to attract existing retailers keen to maintain visibility and new international retailers such as H&M," said Anna Lee, DTZ's Associate Director for Retail.

With rising employment and wage increases, suburban malls continue to benefit from their immediate catchment of residents.

Demand for space in the suburban areas continued to be robust despite the unveiling of major malls like Nex, which soft opened in Q410, and Clementi Mall, which will open early next year.

The average gross rent of prime first-storey retail space in the suburban malls inched up by a marginal 0.3% to $33.70 per sq ft per month in Q410, from $33.60 per sq ft per month in Q3.

In contrast to rents in Orchard/Scotts Road and suburban areas, rents in other city areas fell for the third consecutive quarter as they remained dogged by supply pressure.

With the opening of The Shoppes at Marina Bay Sands, Marina Bay Link Mall, Esplanade Xchange and additions at Raffles City, the average prime first-storey rent in other city areas eased by 0.8% in Q410 to $23.90 per sq ft per month from $24.10 per sq ft per month in Q310.

"Malls in the other city areas will continue to feel the brunt of ongoing developments in the area," said Chua Chor Hoon, Head of DTZ South East Asia Research.

"New retail space from developments in the next two years, such as Gardens By The Bay, Asia Square I and the second phase of Marina Bay Link Mall will continue to put pressure on the rents of surrounding malls," she said.