Singapore remains an attractive destination for international brands and new labels to set up shop, despite steep rents and tough operating conditions, property consultancy Colliers International said on Tuesday.
Still, brick-and-mortar retailers are feeling the heat from the competition posed by e-commerce firms, rising costs, a tighter labour supply and shrinking profits, it added in a report on a study that had looked at 125 retail real estate markets in 50 countries.
Retail rents in Singapore were one of the 10 most expensive in Asia Pacific, coming in seventh place at US$348 per sq ft (psf) a year, the study found.
This was down a spot from its sixth place last year, when retail rents were steeper at US$355 psf a year.
Rents for retail space in Hong Kong’s Queen’s Road Central were the costliest in Asia Pacific and second most expensive in the world at US$2,073 psf.
Monthly gross rents in the prime shopping belt of Orchard Road were mostly unchanged in the past year at $36.25 psf, just slightly down from $36.38 a year ago.
“Despite the demand for space by new stores and food and beverage outlets, the retail environment is challenging due to rising costs, shrinking profits and a tight labour market,” said Ms Chia Siew Chuin, director of research and advisory at Colliers.
But more chains have made their way into Orchard Road the past year, opening shops such as Adolfo Dominguez, Etam, Cath Kidston and Cos.
Mr Simon Lo, executive director of resaerch and advisory, Asia, at Colliers, said that Asian retailers have been competing with the increasing popularity of online firms. But top-tier brands will remain in core city areas, where the supply of new retail space is limited in cities like Seoul and Singapore. This will result in the mid-range labels moving out to decentralised areas, he said.
In Singapore, more suburban malls are expected to open their doors to shoppers over the next year. This includes Waterway Point in Punggol, which has an estimated net lettable area (NLA) of 344,370 sq ft, and Big Box in Jurong East, with an NLA of 260,000 sq ft.
Monthly gross rents for prime retail space on the ground floor in city-fringe malls were $24.35 psf as at Sept 30, up from $23.39 psf a year ago. In the suburban regional centres, monthly rents were $33.72 psf, up a touch from $33.46 a year ago.
“Malls in Orchard Road are facing increased competition from malls in other districts including those in the suburban and regional areas, which enjoy a captive and ready shopper catchment,” said Ms Chia. “These malls have proven to be resilient in performance, largely due to this advantage and their close proximity to MRT stations.
Worldwide, New York’s Fifth Avenue has the most expensive rents at US$3,550 psf each year. Hong Kong’s Canton Road was in third place at US$2,011 psf per year.