Orchard Road rents feared to slide by as much as 5% this year

Blame intense competition and weak spending.

Retailers looking to set up shop in Orchard Road this year will find that landlords will be much more amenable to lowering their rental rates for prime retail space. This is because Orchard Road rents are expected to drop by as much as 5% in 2016, following their 4.9% decline for the whole of 2015.

A report by Colliers highlighted that as of the fourth quarter of 2015, Orchard Road’s average monthly gross rent for ground floor shop space dropped another 1.2% QOQ to SGD34.40 per square foot, as rental performance continued to be impacted by weak tourist spending and muted occupier demand.

“Despite demand for prime retail space continuing to be driven by overseas retailers in addition to selective expansion by domestic operators, the retail market continues to show signs of slowing. Notably, the Orchard Road micro-market, which is more dependent on tourist traffic, registered the steepest fall in rents among the retail submarkets in Q4 2015, as it entered its seventh consecutive quarter of decline,” Colliers noted.

As retailers grow more cost conscious, landlords have begun to show a greater propensity to consider lower offers.

“Prime retail rents are expected to remain under pressure in 2016. Due to high dependency on tourist traffic and strong competition from malls in other localities, Orchard Road’s prime rents could ease by up to 5% this year,” Colliers said.