Prime rents in Orchard Road rise 2% to S$35 psf in 3Q11

However, the threat of an economic slowdown may be putting a lid on rental growth in the coming months.

According to Savills’ latest Retail Briefing, prime rents on Orchard Road inched up by 2% to S$35.1 per sq ft per month in Q3, while prime suburban rents rose marginally by 1% to S$30.5 per sq ft per month. While first storey rents on Orchard Road hover in the region of S$50 to S$60 per sq ft per month, upper storey rents usually tend to be more than 50% lower. However, the gap between first and upper storey rents in suburban malls tends to be smaller.

Outlook

The threat of an economic slowdown is expected to put a lid on rental growth in the short term. However, Singapore’s rising population and robust tourist arrivals will continue to underpin retail sales. Singapore's population, which hit 5.18 million at the end of June, will particularly benefit the suburban malls, and as such, rents for suburban malls are likely to stay resilient despite large supply in the pipeline.

Rents on Orchard Road are also expected to hold firm with retail sales continuing with an upward trajectory ahead of the year-end festive season. However, the rental gap between Orchard Road and suburban malls is anticipated to narrow again on the back of deteriorating economic conditions, with some retailers expected to consolidate their operations amid stiffer competition.