Savills Research

Briefi ng Retail sector January 2012

SUMMARY Rents on are projected to slip by 3% in 2012 while suburban rents are to hold fi rm

Successful malls of the future  will undergo a S$410- could be located in areas with strong million asset enhancement initiative. “Despite market uncertainties, attributes instead of the traditional transit-oriented malls in heavily The Orchard Road occupancy rate Singapore continues to draw populated housing estates. strengthened from 92.8% in Q3/2011 keen interest from international to 94.7% in Q4/2011, while suburban International retailers Abercrombie occupancy rates climbed from 96.8% retailers seeking a presence & Fitch, Leonard Paris and Michael to 97.6%. Kors launched their maiden stores in in southeast Asia. Prime Singapore in Q4/2011. Prime Orchard and suburban rents Orchard and suburban rents inched up 1% in Q4/2011, averaging Several international retailers are S$35.5 and S$30.8 per sq ft per month t r e n d e d u p s l i g h t l y i n Q 4 .” still on the hunt for prime space along respectively. Alan Cheong, Savills Research Orchard Road.

savills.com.sg/research 01 Briefi ng | Singapore retail sector January 2012

Market commentary complex, which includes a four-storey Meanwhile, strong competition A few projects are steering away from mall comprising eight fl agship stores from Orchard Road is siphoning the traditional formula of transit- and 30 dining outlets. At least 40% shopper dollars from the Marina oriented malls in heavily populated of the brands are said to be new to Centre cluster. Vacancy rates in the housing estates. Instead, they are the market. The Capitol site is located latter crept up and landlords are located in areas with strong attributes, in Singapore’s Civic district which seen to be more fl exible in lease with 112 Katong, which held its soft is dotted with historical landmarks negotiations. To stay ahead of the opening in December 2011, being including CHIJMES, Raffl es Hotel and race, Suntec REIT announced a one such example. The 207,000-sq ft St. Andrew’s Cathedral. S$410-million asset enhancement mall leverages the neighbourhood’s initiative for Suntec City to transform the development into an exciting strong Peranakan identity, the leisurely Signifying Singapore’s rising affl uence, shopping and meetings, incentives, ambience associated with the east Orchard Road saw the addition of conventions and exhibitions (MICE) coast and the wealthy population another luxury mall, Scotts Square. destination. To be completed in catchment. Beyond the experience The 75,000-sq ft mall features new- within, shoppers can continue their mid-2015, works include increasing to-market international retailers such itinerary with a wide array of dining, the retail net lettable area (NLA) as Leonard Paris and Michael Kors. entertainment and leisure options from 855,000 sq ft to 980,000 sq ft Joining the ranks of these retailers are located around the mall. Another and enhancing its facade, as well Abercrombie & Fitch in Knightsbridge example would be , as incorporating new duplex stores, and American denim label Wrangler which is undergoing refurbishment cineplex and dining outlets. in ION Orchard. Singapore is the and is slated to be completed by location of choice for international the end of 2012, nestled in the heart According to the Urban retailers looking for a presence in of Chinatown amid its conserved Redevelopment Authority (URA), southeast Asia, and several retailers shophouses and street hawkers. some 127,000 sq ft of shop space are understood to still be on the hunt Over in downtown, the Capitol site is was completed in Q4/2011, for prime space on Orchard Road. being redeveloped into a mixed-use including Alexandra Retail Centre, Greenwich V and . GRAPH 1 The absence of major new supply, Visitor arrivals, 2001–Nov 2011 coupled with healthy demand, resulted in the Orchard Road 14,000 Q1 Q2 Q3 Q4 occupancy rate strengthening from 92.8% in Q3/2011 to 94.7% 12,000 in Q4/2011. In outside central 10,000 region, where the suburban malls are located, the occupancy rate 8,000 climbed from 96.8% in Q3/2011 to

'000s 97.6% in Q4/2011. 6,000 Visitor arrivals and retail 4,000 sales Tourist arrivals hovered above 2,000 1 million in both October and 0 November 2011. This takes the tally 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Jan-Nov from January to November last year 2011 to almost 12 million, a 13.7% jump Source: STB, Savills Research & Consultancy compared with the same period in GRAPH 2 2010. According to the latest data Retail sales (excluding motor vehicles), Jan 2005–Nov 2011 from the (STB), tourism receipts in Q3/2011 hit 140 S$6 billion, refl ecting a 12% increase year-on-year. Shopping and F&B 120 accounted for a majority 30% of 100 tourism receipts.

80 Retail sales (excluding motor 60 vehicles) surged 8.4% year- on-year in October and 6.7% 40 in November, driven mainly by watches and jewellery, as well as 20 telecommunications apparatus 0 and computers. The strong employment market and tourist arrivals were instrumental in the increase in retail sales. Singapore’s Source: Singapore Department of Statistics, Savills Research & Consultancy

savills.com.sg/research 02 Briefi ng | Singapore retail sector January 2012

unemployment rate fell to a 14-year 1% to an average of S$30.8 per sq ft GRAPH 3 low of 2% in 2011 while the median per month in Q4/2011. Prime retail rents, 2007–2011 monthly income of residents in full-time 45 employment grew 8.3%. Future supply Orchard Suburban Major projects expected to come 40

Rental values on-stream this year are JCube, The 35 As prime space on Orchard Road Atrium@Orchard and the refurbished continued to draw keen interest from Chinatown Point. The bulk of the 30 international retailers, prime rents future supply is expected to enter the 25 climbed in Q4/2011, albeit at a modest market in 2013, including 268 Orchard 20 pace of 1%, averaging S$35.5 per sq Road, Jem, and ft per month. Meanwhile, local retailers Westgate. Orchard Gateway sits on 15 S$per sq perft month looking to relocate some of their the sites of the former Specialists’ 10 operations into suburban malls amid Shopping Centre, Hotel Phoenix 5 stiffer competition on Orchard Road and Orchard Emerald, and will be an 0 were also faced with a tight supply integrated development comprising Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 situation. In turn, prime suburban rents retail, offi ce, hotel, the Visitor Centre 2007 2008 2009 2010 2011 also inched up marginally by around and National Library.  Source: Savills Research & Consultancy

TABLE 1 Major projects in the pipeline, 2012–2015 OUTLOOK Estimated Estimated Development Location NLA (sq ft) completion The prospects for the market The Atrium@Orchard Orchard Road 127,000 2012

Chinatown Point (refurbishment) New Bridge Road 205,000 2012 Market uncertainties continue to shroud the retail 268 Orchard Road Orchard Road 131,000 2013 market. However, downside risk is partially mitigated by a positive economic growth projection, rising Jem Jurong Gateway Road 573,000 2013 population and healthy tourist arrivals. Barring external Orchard Gateway Orchard Road 144,000 2013 shocks, tourist arrivals are expected to hold fi rm, with upcoming attractions such as as Westgate Boon Lay Way 426,000 2013 well as a slew of new fashion offerings. Rents of prime /North space on Orchard Road are projected to stabilise in Retail at Capitol site Bridge Road 109,000 2014 2012, although off-pitch space may dip 5%, leading Bedok North Drive/New to an average decline of 3%. Prime suburban rents, Shopping/residential development Upper Changi Road 240,000 2014 on the other hand, have proven to be more resilient in South Beach Beach Road 111,000 2015 the past and we expect them to continue to hold up.

Source: Savills Research & Consultancy

Please contact us for further information Savills Singapore Savills Research

Christopher J Marriott Sulian Tan-Wijaya Alan Cheong Simon Smith CEO, South East Asia Senior Director, Retail & Lifestyle Director, Singapore Senior Director, Asia Pacifi c +65 6415 3888 +65 6415 3880 +65 6415 3641 +852 2842 4573 [email protected] [email protected] [email protected] [email protected]

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