Rents rise in Orchard Road

Gross rents of prime first-storey retail space in Orchard/Scotts Road increased by 1.0% to after falling 7.3% in previous four quarters.

These spaces now cost $39.70 per sq ft per month.

Also, in the suburban areas, retail rents are also beginning to rise in Q4 after having stabilised in the previous quarter. Prime first-storey retail gross rents in suburban malls rose 1.5% quarter-on-quarter to $33.50 per sq ft per month, after having fallen 2.1% from the peak in Q3 2008, according to figures by DTZ Research.

However in other city areas, gross rents of prime first-storey retail space fell by 1.2% to $24.40 per sq ft per month. This reflects a total fall of 10.0% from the peak in Q3 2008.

According to Ms Chua Chor Hoon, Head of DTZ South-east Asia Research, leasing activity has increased as retailers gain more confidence along with economic recovery. There is strong demand for prime first-storey space, evident from the little availability and speed at which they are taken up, despite the amount of new space that has come up along Orchard Road.

Researchers from DTZ estimate that 2.6 million sq ft of new retail space which includes 313@Somerset and Mandarin Gallery was added to the stock in 2009. This is the highest level of new supply seen historically. Together with ION Orchard and Orchard Central completed in the middle of the year, Orchard Road has been given a face-lift with more than 1.3 million sq ft of new retail space in 2009, ready for the festive season.

Prime retail rents in Orchard/Scotts Road and the suburban areas are expected to continue to move up by 2-7% next year. The new supply in Orchard Road is estimated by DTZ Research to fall to about 165,000 sq ft next year. This is only 7% of the almost 2.4 million sq ft of new retail space projected to be available in 2010. Outside of Orchard/Scotts Road and other city areas, most of the new supply will be concentrated in Resorts World Sentosa and Nex at Serangoon Central posing limited pressure on other suburban malls.