There’s no secret that online shopping gained a lot of terrain in past years, offering people the chance to find more competitive prices than in brick-and-mortar stores and the comfort of receiving them at home. But, in spite of all these, the Orchard Road shops are still going strong. Instead of facing shortages, the only thing that shrunk in recent times is the available vacancy rates. According to CBRE, the vacancy rates of the Orchard Road shops dropped to 5.6% in the second quarter, which is the lowest rate in the last fourteen quarters. At Q2 of 2016, the rate was then high at 9.3%.
The CBRE considers that these numbers are influenced by the fact that there is no new supply for the market. Apparently, the flourishing tourism in the area paired with the fact that the most known shopping belt doesn’t have any new products to offer leaves the Orchard Road in a very good position. With its current product offer, the Orchard Road has what it takes to still reel customers in and tenants as well. The best way for a new brand to make its entrance on the market is by being placed in a strategic position that ensures proper visibility. Thus, secondary corridors and floors of the Orchard Road may still have plenty of vacancies left.
Depending on the needs of the brands, there is the possibility to choose between locations ideal for a flagship store, for example, and locations that are great for pop-up stores. When it comes to new openings, this year brought quite a few already. Most of the stores that opened in the Orchard Road in 2018 were from the fashion and food and beverages sectors. For example, Ion Orchard enjoyed a new Fendi shop while Hokkaido Marche opened a new store at Orchard Central, in the first quarter. But, it is worth mentioning Stella McCartney, Ugg, and Swarovski, which all opened in the second quarter.
The overall image of retail rental units in the central region is not that great, as the demand for these units dropped 1.1% from one quarter to the other during the second quarter of the year. But, according to Ms. Christine Li, who is the senior director of research at Cushman & Wakefield, the retail sector is starting to present a two-tier market, represented by attractive and accessible malls that are very inviting for the people that pass them by. But, even if this is indeed good news, the rents in the retail sector will continue to be pressured both by the elevated costs of operating in this domain and the harsh competition coming from online stores.
As Ms. Li recommended, both the owners of retail stores and landlords alike will have to be capable to keep up the pace with the changes that happen in the retail domain, by being open-minded and creative. It’s hard to resist and be successful in such a fast-paced environment if you are not capable of constantly reinventing yourself.
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