Recovery and rejuvenation a boost for Orchard Road and Cairnhill
Orchard Road is an integral part of Singapore’s property market, known for its shopping and retail offering as well its robust residential market. The recent announced Master Plan for the area highlights plans for the upcoming rejuvenation of the area, supplemented by the tight supply of new launches in the Central area. These factors are expected to bode well for the future of Orchard Road and its surrounding vicinity.
Orchard Road is a significant part of Singapore’s property market and is renowned for both its Champions Way Condo shopping and retail offerings, as well as its renowned residential market. The area located in the heart of prime District 9 is lined with luxury shopping destinations, as well as prime residential areas such as Cairnhill, Newton, and the River Valley district.
Home to well-renowned schools such as St Joseph’s Institution Junior, Singapore Chinese Girls’ School, River Valley Primary School, and Catholic Junior College, these neighbourhoods are renowned for their excellent public transport connectivity via various MRT stations. The Orchard Road area is linked to the new Orchard MRT Interchange on the North-South and Thomson-East Coast Lines, as well as the Somerset MRT Station on the North-South Line. Meanwhile, Cairnhill are near the Newton MRT Interchange on the Downtown and North-South Lines.
The outlook for Orchard Road and its surrounding vicinity is looking positive as the area prepares to undergo an exciting rejuvenation. This is outlined in a recently announced Master Plan, which looks to enhance the area’s vibrancy by introducing distinct zones along the shopping belt, as well as more family-friendly green spaces in Dhoby Ghaut. The plan focuses on the Tanglin area as a future arts and mixed-use neighbourhood, while transforming the Somerset area into a youth destination.
Characterised by the flow of Singapore’s international tourist arrivals and the success of its retail market, Orchard Road has the potential to draw major inbound tourists to the area. Official statistics indicate that incoming tourist arrivals went from about 4.8 million in 4Q2019 to just about 158,000 in 4Q2021, before rebounding to about 2.6 million in 4Q2022 as pandemic-related restrictions eased.
Retail rents are also a leading indicator of the health of the retail market. Rental data tabulated by EdgeProp Singapore has shown that islandwide retail rents fell from $11.08 psf per month (pm) in 2Q2020 to $9.01 psf pm in 1Q2022. Positively, this figure picked up to about $9.81 psf pm in 4Q2022 due to a domestic-led recovery and loosening of pandemic-related measures.
While this still falls below the pre-pandemic levels, a steady return of mainland Chinese tourists throughout 2023 is forecast and could add to this ongoing recovery.
Glancing at the recent collective sales in the Orchard Road area, the benchmark sale for commercial en blocs was set by Ming Arcade on Cuscaden Road, which was sold to Singapore family office Royal Group of Companies for $172 million or $3,125 psf ppr in December 2022. This was followed by the sale of Tanglin Shopping Centre on Tanglin Road which was sold to privately-held real estate investment firm Pacific Eagle Real Estate for $868 million or $2,769 psf ppr in February 2022.
However, with the Orchard Road area being extremely mature and well-developed, the supply of new housing is limited. As a result, the price gap between new private residential prices in the Core Central Region (CCR) relative to the Rest of Central Region (RCR) and Outside Central Region (OCR) is gradually shrinking. EdgeProp Singapore’s Market Trends tool shows that in 1Q2018, the average new launch prices in the CCR and RCR were $2,697 psf and $1,673 psf respectively, with the average price in the OCR at $1,305 psf. By 1Q2023, the price 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.
These various positive indicators surrounding Orchard Road, together with its tight supply of new launches, are expected to continue boding well for the future of the area.
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