Orchard rents end year-long fall

Orchard rents end year-long fall

Most retail property watchers bullish about next year as economy improves

By Esther Teo

IN KEEPING with the festive decorations lighting up the prime Orchard retail belt, landlords on the famous strip have just received news bound to brighten the gloomy mood cast by the downturn.

After four straight quarters of decline, rents for first-storey Orchard Road and Scotts Road retail space inched up 1 per cent to $39.70 per sq ft (psf), a month after falling 7.3 per cent since the third quarter of last year.

Rents in suburban areas seem to be stabilising as well, buoyed by the upswing in the economy, property reports suggest.

The report, from DTZ Research, also said prime first-storey gross rents in suburban areas rose 1.5 per cent quarter-on-quarter to $33.50 psf per month.

However, rents in fringe city areas such as Great World City and Bugis Junction continued to fall. These malls miss out on local residents, who patronise suburban malls, and the tourist crowd that heads to Orchard, said DTZ South-east Asia research head Chua Chor Hoon.

She added that leasing activity has increased as retailers gain more confidence along with the economic recovery: ‘There is strong demand for prime first-storey space, evident from the little availability and speed at which they are taken up, despite the amount of new space that has come up along Orchard Road.’

An estimated 2.6 million sq ft of new retail space, including 313@Somerset and Mandarin Gallery, were added to the stock this year - the most ever seen. A major revamp of Orchard Road alone has meant almost 1.4 million sq ft of new retail space.

At the start of this year, things had looked quite bad. Prime shop rents in Orchard Road had fallen for the first time in five years in the fourth quarter of last year, as consumers tightened their belts and new malls flooded the market.

CB Richard Ellis (CBRE), for one, painted a gloomy picture in March, tipping a 15 per cent to 20 per cent fall in Orchard Road prime rents this year as the economy slumped.

Many retailers had cried out for rent cuts as they saw the economic crisis further undermining already weak sales.

However, things are now looking up, with CBRE reporting $801.5 million worth of retail investment transactions concluded in the fourth quarter, making up 85.5 per cent of the full-year total.

Most analysts have also revised their forecasts, expecting prime retail rents to end the year down 3 per cent to 6 per cent.

Next year looks far brighter. Ms Chua expects prime retail rents in Orchard Road and suburban areas to move up by 2 per cent to 7 per cent. Property consultancy Knight Frank’s managing director Danny Yeo expects a 1 per cent to 3 per cent increase.

‘With the major malls in Orchard already open, prime retail space is now dwindling quickly, so retailers have fewer choices available… The market is also less uncertain, so landlords can afford to increase rental,’ he said.

CBRE said the year ahead looks exciting given the opening of the two integrated resorts (IRs), more underground retail space at Marina Square, Raffles City, Marina Bay and Circle Line stations, and suburban malls in Clementi and Bedok.

However, it was less bullish, predicting Orchard rents will dip 5 per cent to 10 per cent next year as businesses and trading patterns adjust to the completion of the new malls. CBRE expects rents to stabilise only in the next 12 to 18 months.

A spokesman at Mapletree, which has property interests, said: ‘In recent months, the economic statistics have improved and, with that, consumer confidence has risen in tandem and people are spending again. This has a direct correlation with retailers’ confidence in the recovery in the market.’

CapitaMalls Asia retail management (Singapore) general manager Teresa Teow also said retailers were more optimistic, with some looking at expansion again.

Dr Kenny Chan, managing director of watch chain The Hour Glass, also said he has seen consumer confidence improve, with an increase in spending compared with the same period last year.

DTZ Research estimates the new supply of retail space in Orchard Road will fall to 165,000 sq ft next year - just 7 per cent of the almost 2.4 million sq ft of new retail space projected, mostly at the IRs and at Nex in Serangoon Central.

Source : Business Times - 22 December 2009

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Recovery may not drag down jobless rate for now

Recovery may not drag down jobless rate for now

Manpower minister says rate will remain high for some time as it lags recovery

By FELDA CHAY

(SINGAPORE) Singapore’s unemployment rate is likely to remain high even as the economy is showing signs of recovery, said Manpower Minister Gan Kim Yong yesterday.

Mr Gan: Urges employers and workers to remain flexible, to go on training
‘I think the overall employment sentiments have improved . . . However, I think the unemployment rate will remain high for some time. This is because typically, employment will lag behind economic recovery,’ said Mr Gan.

The seasonally adjusted unemployment rate for each of the first three quarters of this year hovered between 3.3 per cent and 3.4 per cent. Among the resident labour force, this rate ranged from 4.6 per cent to 5 per cent - which it hit in the third quarter.

‘So I would urge employers and workers to remain flexible . . . to go on training, to be adaptable, to be prepared to accept jobs that are different from what they are used to, especially for those that have been unemployed and those who have been retrenched,’ said Mr Gan.

He added that there are many programmes under the government-funded Skills Programme for Upgrading and Resilience (Spur) that can help those who were given the axe to make a career switch. Launched last December for a two-year run, Spur pays a part of workers’ wages as they undergo training, while also subsidising their training fees.

Mr Gan was speaking to reporters while on a visit to two retail outlets under Wing Tai Retail, a beneficiary of the Spur programme. As of end November this year, 42,000 job seekers have found employment through the programme by going to the Workforce Development Agency’s (WDA) career centres at the Community Development Councils (CDCs), NTUC’s Employment and Employability Institute (e2i) and the Continuing Education and Training Centres (CETs), said the Ministry of Manpower (MOM) and WDA yesterday.

The bulk of these workers were rank-and-file workers with secondary or lower education, with six in ten aged 40 years and above. Responses from these workers on Spur have been positive thus far, said Mr Gan, with many of them saying that it has been effective in helping them to secure jobs. He hopes that firms will continue to step forward and send their workers for training even as the economy recovers and employers feel the need to ground employees at the workplace in anticipation of increased orders.

According to MOM and WDA figures, 264,000 workers from 4,000 companies have committed to Spur training as of end November, two-thirds of whom have already commenced, or completed their training.

But while the headline figure is impressive, fewer workers are signing up for training each month. Official figures show that only 11,000 had signed up in October for courses under Spur, a number that is about half of the 21,000 in September. In June, 35,000 workers signed up for training. This fell to 30,000 in July and 23,000 in August.

‘It is important for us to take this opportunity to urge companies not to slow down on training because it is important for us to keep our skills relevant, to equip our workers with the necessary ability and capability to be able to tap into the emerging opportunities,’ said Mr Gan.

‘I would encourage companies not to slow down on the training but to continue to tap on Spur to provide training and upgrading for their workers. Spur is a programme that will last for two years, we have another 12 months to go and we want to take this opportunity to help companies reposition themselves better to meet the challenges as we recover from the recession.’

Source : Business Times - 22 December 2009

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MINDY YONG

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