Rents at Singapore’s suburban malls are fast catching up with prime Orchard Road retail space rents, as neighbourhood malls draw more interest from tenants and shoppers.
The difference between suburban rents and prime Orchard Road rents narrowed to just nine percent in Q2 2010, from 24 percent at the beginning of 2009 and 21 percent in Q1 2005, according to CB Richard Ellis (CBRE).
Upper-storey space in suburban malls is already more expensive compared with upper-storey space at the Orchard Road and Scotts Road area, according to data released by DTZ.
The rental gap tightened as rents in Orchard Road dropped for the seventh consecutive quarter, while suburban rents still edged up during the second quarter of 2010, CBRE said.
Rents in the prime Orchard Road area dropped to $31.10 psf pm, reflecting a 3.4-percent decrease from $32.20 psf pm in Q1 2010.
On the other hand, suburban malls saw a 1.4-percent quarter-on-quarter growth in prime rentals to $28.50 psf pm.
When it comes to retail space on upper floors, suburban malls are fetching more than those in Scotts Road and Orchard Road.
DTZ said upper-storey rents at suburban malls increased 0.4 percent quarter-on-quarter to $22.90 psf pm in the second quarter of this year, while upper-storey rents in the Orchard Road/Scotts Road area remained flat at $20.50 psf pm.
Several analysts explained that rents in Orchard Road are depressed following a large amount of new supply (from Ion Orchard, 313@Somerset and Orchard Central) came onstream over the past year.
"Competition in the Orchard Road and Scotts Road and other city areas has intensified and the increased range of retail choices has rendered consumers to be more selective in their purchases," said Anna Lee, associate director for retail at DTZ.
"Retailers, particularly in the newer malls, are adjusting to the vagaries of consumer preferences and resulting in early termination of leases in some cases," she added.