Recovery and rejuvenation a boost for Orchard Road and Cairnhill

Prime areas in Orchard and Cairnhill remain a key wealth anchor for many property investors and tenants. The prime rental market for luxury developments within the district is expected to continue to remain resilient, as it remains integral to the Singaporian shopping experience and lifestyle, as well as the wider retail market. The shop-houses and shophomes are also likely to benefit from the new rejuvenation plans in the area, while the residential market is likely to remain resilient due to the strong demand and limited supply.Rental data tabulated by EdgeProp Singapore shows that islandwide retail rents fell from $11.08 psf per month (pm) in 2Q2020 to $9.01 psf pm in 1Q2022. But a domestic-led recovery and loosening of pandemic-related measures saw retail rents pick up to about $9.81 psf pm in 4Q2022 – still below the pre-pandemic level, yet a positive trend is expected for the upcoming quarters. Additionally, the steps taken to revitalize the Orchard Road shopping belt have already begun to pay off, with the collective sales of Tanglin Shopping Centre and Ming Arcade in 2021 setting a new benchmark for commercial en bloc sales in the area.

The Orchard Road shopping belt is an iconic and integral part of the Singaporean shopping experience, luring both international and domestic visitors and tourists. But the Covid-19 pandemic took its toll on the tourism industry, resulting in a drastic reduction in international tourist arrivals from about 4.8 million in 4Q2019 to just about 158,000 in 4Q2021.

The start of 2021 marked the beginning of a robust recovery, however, with inbound tourist numbers rebounding to about 2.6 million in 4Q2022. This recovery has lasted despite the continued turndown of the major driving force of mainland Chinese tourists, until recently locked behind international travel restrictions.

The health of the retail market can be measured through rentals, which fell from $11.08 psf per month (pm) in 2Q2020 to $9.01 psf pm in 1Q2022. Further loosening of pandemic-related measures and a domestic-led recovery have seen those numbers rise to $9.81 psf pm in 4Q2022, though this is still below the pre-pandemic level. Yet signs point to a positive trend for subsequent quarters.

Prime residential neighbourhood

Hungry for more than just luxury shopping, Orchard Road is also surrounded by prime residential neighbourhoods – Cairnhill, Newton, and the River Valley district – that offer family-friendly green spaces as well as excellent public transport connectivity via the Orchard MRT Interchange and the new North-South and Thomson-East Coast Lines, and the Somerset MRT Station. To capitalize on the rejuvenation afoot, several older developments have been sold through collective sales, setting a new benchmark for commercial en bloc sales in the area – Tanglin Shopping Centre and Ming Arcade were two of these sales in 2021.

According to EdgeProp Singapore’s Market Trends tool, the average new launch prices in the Core Central Region (CCR) was $2,697 psf in 1Q2018, while the Rest of Central Region Senja Close EC (RCR) prices averaged at $1,673 psf, and Outside Central Region (OCR) prices started at $1,305 psf at the same time. Fast-forward to 1Q2023, and the gap between the average prices in the CCR ($2,899 psf) and RCR ($2,562 psf) had shrunk to about 13%, with the average price in the OCR moving up to $2,111 psf.

Despite the tight supply of new housing in the Cairnhill and Orchard areas and that the area is popular among expats, Prime areas in Orchard and Cairnhill remain a key wealth anchor for many property investors and tenants.

Furthermore, buoyed by the new rejuvenation plans for the Orchard Road area, the prime rental market for luxury developments likely to remain resilient and integral to Singaporean’s shopping experience. All of this signaling that the Orchard Road shopping belt is set to continue and thrive in the future.