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Thread: Can prime HDB flats 'sleigh' the Orchard Road ennui?

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    Default Can prime HDB flats 'sleigh' the Orchard Road ennui?

    Can prime HDB flats 'sleigh' the Orchard Road ennui?

    Nov 23, 2021

    CHRISTMAS in Singapore comes early, with festivities already in full swing.

    Themed "Christmas in Bloom", this year's Christmas light-up in Orchard Road sees the shopping street set aglow with fairy lights and oversized floral decorations.

    Malls are gorgeously decked out and retailers are rolling out enticements to lure shoppers.

    Could year-end festivities herald good times for Orchard Road shops and landlords with the economy growing, the job market improving, and international travel gradually resuming?

    Unfortunately, investors appear sceptical on Orchard Road assets.

    Starhill Global Reit has interests in 2 trophy assets on Orchard Road, Wisma Atria and Ngee Ann City, which account for over two-thirds of the value of its investment properties.

    As at Nov 19, Starhill Global Reit traded at a 21 per cent discount to its net asset value (NAV) as at end-June. In contrast, Frasers Centrepoint Trust (FCT), which owns mainly suburban malls in Singapore, traded at a slight premium to its NAV as at end-Sep.

    Suburban malls are outperforming Orchard Road malls. In the first 9 months of 2021, CapitaLand Integrated Commercial Trust (CICT) saw rental reversion, measured by average incoming rents versus average outgoing rents, slip 0.9 per cent at its suburban malls compared with a sharper 8 per cent fall at its downtown malls, which include properties in Orchard Road and the city area.

    For the first 9 months of 2021, average tenant sales per square foot (psf) at CICT's suburban malls and downtown malls were 92 per cent and 72 per cent respectively of their average in the pre-pandemic days of 2019.

    As at end-2020, the valuation of prime Orchard Road mall ION Orchard, which is owned by CapitaLand Investment and Sun Hung Kai Properties, fell over 8 per cent from a year ago while that of leading suburban property Tampines Mall, held by CICT, dipped 1 per cent. ION Orchard's valuation as at end-2020 is below that as at end-2016.

    SPH Reit saw tenant sales at prime Orchard Road asset Paragon and suburban mall The Clementi Mall down 1 per cent and up 5 per cent respectively year on year for the financial year ended Aug 31, 2021. Compared to a year ago, the valuation as at end-Aug 2021 of the former was flat while that of the latter rose 2 per cent.

    The Urban Redevelopment Authority's data tracking lease commencements showed median rent of Orchard Road area retail space for the third quarter of 2021 is around 20 per cent lower than in the fourth quarter of 2019. Vacancy rate for Orchard Road retail space in Q3 2021 is 11.6 per cent, almost double that of 5.9 per cent in Q3 2019.

    Singapore's premier shopping belt may need a major revamp. The growth of online shopping has negated the need for locals to visit Orchard Road to get a good selection of retail offerings.

    The mix of retail and leisure offerings at destinations such as the 2 integrated resorts, Jewel Changi Airport and VivoCity draw local and international visitors away from Orchard Road. Some exciting new concepts may now open first at VivoCity or Jewel or a large suburban mall rather than at Orchard Road.

    The opening of stores by high street brands in suburban malls and the growing array of F&B offerings in the suburbs allow many residents, who live in the suburbs, to shop, wine and dine near home.

    Moreover, Orchard Road's ability to draw shoppers from Asia has been undermined by the proliferation of swanky malls in major cities in South-east Asia and China.

    Just as the Central Business District (CBD) is changing from being office-centric towards more mixed-uses, perhaps Orchard Road can move from being retail-centric to having more other uses including a mix of housing types.

    New homes are being added in the Orchard Road vicinity - typically super luxury condominiums. Selling prices of new homes at Boulevard 88 along Orchard Boulevard and Park Nova along Tomlinson Road generally exceed S$3,500 per square foot (psf) and S$4,500 psf respectively.

    There can be lessons for Orchard Road to learn from the suburbs on transformation. Jurong East is a prime example of a suburb that has undergone substantial changes in recent years. Today, it is a well-rounded live, work, play destination that is amply served by public transport.

    Many HDB residents live in the area together with some condo residents. Offices have sprouted out at Jurong Gateway to add to those at International Business Park. Residents and office workers are served by shopping malls such as IMM Building, Jem, JCube and Westgate. Leisure offerings include Science Centre Singapore and Snow City. Residents in the area enjoy easy access to schools and public healthcare facilities including the Ng Teng Fong General Hospital.

    Perhaps a transformed Orchard Road can feature not just luxury homes but other homes including public housing. Prime HDB flats have been built in Tanjong Pagar, namely Pinnacle@Duxton. New prime HDB flats will be built in the Greater Southern Waterfront. Building HDB flats together with supporting amenities can increase the area's catchment population and help reduce Orchard Road's reliance on international visitors.

    Bringing other catchment populations to Orchard Road such as students can also add vibrancy to the area. For example, the CBD has been enlivened by the building of Singapore Management University in the heart of the city.

    The way that people live, work and play is changing - concentrating offices in the CBD and shops along Orchard Road may no longer be relevant.

    Orchard Road is not standing still, with new attractions being developed. Lendlease Global Commercial Reit is redeveloping the open-air carpark at the junction of Grange Road and Somerset Road into a lifestyle events space that offers unique food concepts and serves as a venue for concerts and events.

    Government bodies are seeking proposals from developers to offer "an attraction concept with differentiated and immersive experiences" on a vacant plot of land next to the existing skate park opposite Orchard Gateway. Proposed uses that are a first in Asia, South-east Asia, Singapore or Orchard Road would be viewed favourably.

    The rejuvenation of Orchard Road can be helped further if older strata-owned developments, such as Orchard Towers and Tanglin Shopping Centre, succeed with their en bloc efforts, thereby allowing for higher quality and more relevant stock to take their places.

    While the Orchard Road area is a location of choice for buyers of super luxury condos, much more can be done to transform the area into a vibrant multi-faceted precinct.

    An Orchard Road that is enhanced by public housing and its amenities, can be distinct by having some exciting and exclusive retail concepts, as well as world-class venues to draw crowds. Envision Orchard Road hosting world-class attractions such as a museum or performing arts venue or theme park or sports venue.

    Transforming physical spaces takes time. Replacing older buildings with new developments can take several years. Suitable sites need to be found to develop new public housing, leisure offerings or other amenities.

    The journey to transform Orchard Road will be arduous. But the area can dazzle again, possibly with a different type of magic.

    Meanwhile, may the cash tills ring for Orchard Road shops, which have been enduring a torrid time, this year-end.

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