Retail rents fell in the third quarter on the back of the subdued economy and wary consumers, although Orchard Road and Scotts Road bucked the trend.
Average monthly gross rents for prime first-storey speciality retail shops dipped 1.2 per cent to about $29.30 per square foot (psf) in the three months to September compared with the previous quarter, said property consultancy Edmund Tie & Company yesterday.
This was 9.6 per cent below the peak in the first quarter last year when the average monthly gross rent was about $32.40 psf.
It blamed the decline on the slower economy and job cuts that deterred consumers from hitting the shops.
In the second quarter of this year, about 4,800 workers were laid off, 48 per cent more than in the same period last year.
Rents in other city areas besides Orchard and Scotts Roads fell 3 per cent to about $20.10 psf per month compared with the second quarter, while suburban area rents dropped 1.5 per cent quarter on quarter to $30.60 psf.
NEW RETAIL ATTRACTIONS
The recent opening of several high-profile stores in the area has further enhanced Orchard Road-Scotts Road's position as one of the top shopping attractions in South-east Asia.
EDMUND TIE & COMPANY
However, retail rents in Orchard and Scotts Roads remained at $37.20 psf, "notwithstanding the slower economy and fears over the spread of the Zika virus", said Edmund Tie & Company, adding that the area's resilience was supported by the lack of new retail developments.
"While retailers in Orchard Road and Scotts Road face strong competition for tourist dollars from regional countries, renowned global brands and local retailers are still attracted to set up shops there.
"The recent opening of several high-profile stores in the area has further enhanced Orchard Road-Scotts Road's position as one of the top shopping attractions in South-east Asia."
For instance, Japanese clothing giant Uniqlo opened its South-east Asian flagship store at Orchard Central mall on Sunday, attracting around 2,000 people before the doors opened, while Japanese label Christian Dada - famously worn by pop star Lady Gaga - opened its first store outside Japan at 268, Orchard Road in August.
Edmund Tie & Company expects the rent declines to moderate next year, "barring any external shocks".
And despite e-commerce gaining traction, Dr Lee Nai Jia, the firm's South-east Asia head of research, said it is too premature to write off the brick-and-mortar retail sector.
"Many landlords and retailers are making use of big data analytics to understand the underlying purchasing psychology, which helps them to redefine their marketing strategies to better cater to their customers' needs," he noted.