Rental gap dives to record low in 2011

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The rental gap between top suburban locations and prime Orchard Road narrowed to a record low last year. In Q1 2011, the gap was only 97 cents psf.

The tightening of the gap is attributed to the declining rents in Orchard Road and increasing rents in suburban areas. Property consultancy CBRE reported that the difference widened to S$1.85 psf in Q4 last year.

In the past few years, the widest gap was posted in Q4 2007, when rents for suburban spaces were S$7.65 psf below their prime Orchard Road counterparts.

CBRE data also showed that prime suburban rents soared to an all-time high of S$29.75 psf in Q4 2011, while prime Orchard Road rents dived from its peak of S$36.76 psf in Q3 2008 to only S$31.60 psf in Q4 2011.

Several experts noted that suburban rents show less fluctuation, as they serve a specific catchment of shoppers, providing daily necessities. Orchard Road malls, in contrast, are more vulnerable to visitor arrivals and changes in the economy.

Letty Lee, Director of Retail Services at CBRE, said the gap between suburban and prime Orchard rents started to widen again in late 2011, attributed to the addition of new supply in suburban space.

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