Chart of the Day: Take a look at Orchard Road’s incredibly skewed supply and demand for retail space

A massive undersupply is on the horizon.

The fight for retail space is becoming more intense in the country’s glitzy shopping capital. Retailers are struggling to get business spots amid a massive undersupply in Orchard Road.

According to a report by OCBC, Orchard Road’s occupancy rates are expected to hit 97.2 by the end of 2017, a significant jump from 95.8% at the end of last year.

“There was a total addition of 384k sq ft net of lettable area in 2014, mainly from Shaw Centre and 268 Orchard. After 2014F, however, we see no known additions in the Orchard pipeline,” noted the report.

Here’s more from OCBC:

In addition, we continue to see demand from international retailers, particularly new-to-market brands, seeking to establish a presence in the Orchard retail district.

For instance, brands such as Kate Spade Saturday, Ash, Roger Vivier and Valextra have also set up their first physical stores in various developments in Orchard over 2013.

Given the limited pipeline, we forecast an under-supply in the Orchard retail segment from 2015F to 2017F, driving occupancy rates from 95.8% as at end 2013 to 97.2% as at end 2017F.

Under our base case, Orchard prime retail rents will grow at a CAGR of 2.0% p.a. to S$36.9 psf per month as at end 2017F.

In addition, we anticipate continued capital appreciation; Orchard retail capital value is forecasted to increase to S$8.0k psf as at end 2017F from S$7.0k psf as at end 2013.

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