When Singaporean Hidayu Mustaafa craves for retail therapy, she walks to a mall five minutes from her home in the eastern suburb of Tampines instead of bussing down to Orchard Road – the island-state’s shopping Mecca.
That’s bad news for Orchard Road’s glitzy malls, which showcase brands such as Inditex’s Zara and H&M as well as luxury names like Chanel and Prada. Increased competition from suburban malls and online retailers, combined with falling tourist numbers from China and Indonesia, have hurt spending and pushed retail rents to their lowest since 2011.
Average monthly gross rents of prime retail space on Orchard Road slipped 1 percent in the second quarter from the previous three months to S$37.79 ($28.03) per square foot, according to Cushman and Wakefield. “It is more imperative than ever that shopping malls need to innovate and refresh shopping experiences to stay ahead of the competition,” said Christine Li, the real estate consultant’s research head in Singapore, adding that less established malls with little differentiation will underperform.
At least one mall has decided to recently revive its offerings. Wheelock Properties’ Scotts Square, where occupancy rates have been on a downtrend, has said it would bring in names like fashion label Alexander McQueen and Belgian fine leather goods maker Delvaux.
Cushman and Wakefield’s Li expects Orchard retail rentals to fall 2.1 percent by end-2015 from the end of June, while suburban mall rentals could prove more resilient and remain flat. “It’s a very challenging retail environment still for Orchard Road, but the bright spot is that there is no (new) supply in market (until 2018),” Li said.