Premier retail rents worldwide suffer decline

Singapore's Orchard Road ranks 27th most expensive retail street averaging US$330.19 per sq ft per year.

Colliers International's latest survey on global retail rents concluded that premier street-front retail rents in most regions have continued to decline for the second consecutive year. This is the result of the lingering effects of the global recession, which saw a decrease in demand for prime retail real estate; which in turn, affected rents.

Published on an annual basis, the 2010 global survey tracked annual retail rents (US$ per sq ft per year) of the world's prime retail corridors – from 1Q 2009 to 1Q 2010 – across 127 cities in North America, Europe, Middle East and Africa (EMEA), Asia Pacific and Latin America.

Singapore ranked 27th worldwide, with rents of prime retail space along Orchard Road averaging at US$330.19 per sq ft per year. This was a notch up from the 28th position registered for the last survey in 2009.

Ms Tay Huey Ying, Director of Research and Advisory, Colliers International, says, "Although Singapore moves up the rank this year – reflecting a 1.9 percent year-on-year (YoY) increase in our retail rents from US$324.00 per sq ft per year, the gain was due to the weakening of the US dollar against the Singapore currency. In fact, in local currency terms, rents for prime retail space on Orchard Road were down by 5.5 percent YoY as of 1Q 2010."

On the global scale, Paris (Champs-Élysées) took the first spot with an average rent of US$1,255.90 per sq ft per year, while New York (Fifth Avenue) and Hong Kong (Russell Street, Causeway Bay) took the second and third positions at US$1250.00 per sq ft per year and US$1,205.46 per sq ft per year, respectively.

On the ranking for Asia Pacific countries, Singapore maintained its 6th position. Hong Kong (Russell Street, Causeway Bay), Sydney (Pitt Street Mall) and Tokyo (Ginza-Chuo Avenue) took the top three spots with their retail rents averaging at US$1,205.46 per sq ft per year, US$768.85 per sq ft per year and US$545.91 per sq ft per year, respectively.

Ms Tay continues, "The retail scene in Singapore has been buzzing with activities since 2009 with the opening of four new malls – Ion Orchard, Orchard Central, Mandarin Gallery and Somerset 313 – in Orchard Road, supplying more than 1.3 million sq ft of net lettable retail space. This has strengthened Singapore's standing as a premier retail destination in Asia and broadened the retail offering and experience in terms of new brands and concepts."

Outlook
Although retailers worldwide still expressed much caution in expanding and committing to new stores, there are however positive signs to suggest that the worst of the downturn was over.

Both the financial centres and tourism-dependent cities have started to show signs of recovery. Many of the world's rich are also feeling more secure and comfortable with luxury purchases. As such, we could expect high-end retailers to embark on their expansion plan and start sourcing for prime retail premises to meet the demand of consumer.

Additionally, given the continued emergence of a sizeable middle class in Asia Pacific, the Middle East, and Central and Eastern Europe – which will be a key source of growth for many high-end retailers – luxury retail is expected to observe a long term upward trend.

Ms Tay concludes, "For Singapore, barring any unforeseen external shocks, the improving economy, a better job market outlook, as well as tourism market recovery, will support the performance of the retail industry.

For the prime Orchard Road shopping and tourist belt, demand for good quality retail space is expected to stay healthy. With most of the new supply already completed in 2009, prime retail rents in the Orchard Road are expected to firm in 2010."