Competition from suburban malls, online retailers among reasons for the decline
When Hidayu Mustaafa craves for retail therapy, she walks to a mall five minutes from her home in the eastern suburb of Tampines instead of travelling to Orchard Road.
That is bad news for the shopping district'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 in Orchard Road slipped 1 per cent in the second quarter from the previous three months to $37.79 per square foot, according to property consultants Cushman and Wakefield.
"It is more imperative than ever that shopping malls innovate and refresh shopping experiences to stay ahead of the competition," said Ms Christine Li, the real estate consultant's research head in Singapore, adding that less-established malls with little differentiation will underperform.
STAY FRESH TO STAY AHEAD
"It is more imperative than ever that shopping malls innovate and refresh shopping experiences... ''
MS CHRISTINE LI, Cushman and Wakefield's research head in Singapore
Department store operator Isetan has ceased its operations at Wisma Atria and is in the midst of leasing out the space to other retailers. It recently signed a deal to lease out a basement floor to a retailer of ladies fast-fashion apparel. The lease will commence at the end of the third quarter.
Meanwhile, it is engaged in further discussions with potential tenants for the leasing of the other floors. While it endeavours to lease out all the remaining floors, "there is no assurance that it would be able to achieve full tenancy for the premises at Wisma Atria due to market conditions or commercial reasons", it warned.
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 notable brands, such as fashion label Alexander McQueen, and Belgian fine-leather goods-maker Delvaux.
Cushman and Wakefield's Ms Li expects Orchard retail rentals to fall 2.1 per cent by the end of this year from the end of last month, 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)," Ms Li said.
It is not all gloom, though. A recent ranking by global property adviser CBRE showed that Singapore is second only to Tokyo in the retail business, having attracted 58 new retail brands last year, just shy of Tokyo's 63.
The report also noted Singapore's capacity to showcase new brands was boosted by orchardgateway, Orchard Road's newest mall with a fashion slant, and the Shaw Centre's recently renovated retail section.