Retail rents at Orchard road have peaked

Rents at prime Orchard are more likely to remain flat while suburban rents are apt to see a moderate upside of just 2% – 3% this year, according to property brokerage firm Knight Frank.

Citing a study from the CBRE,  Knight Frank noted that the gap between prime Orchard and suburban rents continues to narrow, amounting to S$1.00 on average in 1Q11 compared to S$4.10 a year ago. As such, the property experts from the brokerage firm surmise that It is likely that prime retail rents along Orchard Road will continue to slide in the near term as recent completions along Orchard Road have not been digested and rental re-negotiations at some of these malls are impending.

"According to our estimates, there is approximately 1.9m sq ft of mall space in the 2011-2012 pipeline. The retail sector continues to grapple with supply-side issues, brought on by the massive injection of new retail space in 2009-10. Some of the tourism expenditure is also diverted to the casinos and more consumers are shopping online, particularly among the younger group," it said.

The appreciating SGD, according to Knight Frank, will also affect tourist spending and motivate more Singaporeans to shop overseas. 

The research firm thus cautioned that landlords now face an increasingly uphill task ahead to maintain attractive rentals, not only to retain but also enhance the tenant mix.