Orchard Road shop vacancy dips to 5.6% in Q2

Take-up of retail space across the island remains healthy as around 226,000 sq ft of retail space was absorbed in the second quarter, higher than the 108,000 sq ft of net supply in the same quarter.
Take-up of retail space across the island remains healthy as around 226,000 sq ft of retail space was absorbed in the second quarter, higher than the 108,000 sq ft of net supply in the same quarter.PHOTO: GIN TAY FOR THE STRAITS TIMES

Despite the advancing e-commerce threat, Orchard Road shops appear to be holding their own, with vacancy rates having fallen to 5.6 per cent in the second quarter, says CBRE.

This is the lowest vacancy rate in 14 quarters and well below the 9.3 per cent seen in the second quarter of 2016.

According to CBRE's head of research for South-east Asia Desmond Sim, this could likely be due to the lack of new supply.

He added: "On the back of an improved tourism market, coupled with limited new supply along our famous shopping belt, Orchard Road is still able to attract new tenants." New-to-market brands still require and demand visible frontages with high footfall, although Mr Sim cautioned that there may be vacancies on secondary corridors and secondary floors. International tenants are also taking a more strategic approach, he added.

The flagship store, for example, is usually located on a transport node so that it can offer multimodal shopping experiences such as shop and deliver or click and collect. Other locations taken by the brand may be used for pop-up stores.

He noted that new openings this year predominantly came from the food and beverage sector and the fashion trade.

Some of the new openings in the first quarter, CBRE said, include luxury fashion brand Fendi at Ion Orchard and Hokkaido Marche at Orchard Central.

In the second quarter, there were fashion brands at Paragon, including Stella McCartney and Ugg. At 313@somerset, there was Swarovski.

Overall, according to Urban Redevelopment Authority data released last Friday, central region retail rents fell 1.1 per cent quarter on quarter in the second quarter this year. The fall in rents was led by fringe area rents, which fell by 1.6 per cent, whereas central area rents fell by 1 per cent.

Ms Christine Li, senior director of research at Cushman & Wakefield, noted that "a two-tier market is forming in the retail segment, as accessible and well-managed malls attract the bulk of pedestrian footfall.

She added that retail rents could remain pressured by a high operating-cost environment as well as competition from e-commerce.

There will also be more supply coming on line from the PLQ Mall in Paya Lebar as well as the Jewel at Changi Airport.

Ms Li said that "retailers and landlords have to continue to reinvent themselves, investing in technology and focusing on lifestyle and activity-based experiences to keep pace with the fast-changing retail landscape."

Take-up of retail space across the island remains healthy as around 226,000 sq ft of retail space was absorbed in the second quarter, higher than the 108,000 sq ft of net supply in the same quarter.

Much of this take-up of retail space was in the suburban areas.

Ms Li added that "prime suburban space remains highly sought after by retailers".

There was a strong take-up of space at the recently opened Century Square, which is in Tampines, after a nine-month makeover.

A version of this article appeared in the print edition of The Straits Times on July 30, 2018, with the headline 'Orchard Road shop vacancy dips to 5.6% in Q2'. Print Edition | Subscribe