Orchard rents end year-long fall

Source : Straits Times – 22 Dec 2009

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.

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More retail space

Almost 1.4 million sq ft of retail space were added to Orchard Road this year as four new shopping malls opened.

Mandarin Gallery: 126,000 sq ft
Ion Orchard: 710,420 sq ft
Orchard Central: More than 250,000 sq ft
313@Somerset: 294,000 sq ft

Prime retail rents pick up in Q4, says DTZ Research

Source : Channel NewsAsia – 21 Dec 2009

Prime retail rents have picked up in the current fourth quarter as leasing activity gather steam on the back of improved confidence and economic recovery, according to DTZ Research.

Its estimates showed that gross rents of prime first-storey retail space in Orchard and Scotts Road increased marginally by one per cent to S$39.10 per square foot per month, after falling 7.3 per cent in the last four quarters.

However, in other city areas, gross rents of first-storey retail space fell by 1.2 per cent to S$24.40 per square foot a month, reflecting a total fall of 10 per cent from the peak in the third quarter of 2008.

Similar rents in suburban malls fared better, with DTZ saying they rose 1.5 per cent on quarter to S$33.50 per square foot per month.

For 2010, DTZ expects prime retail rents in Orchard/Scotts Road and the suburban areas to increase by between two and seven per cent.

This year, it said over 1.3 million square feet of new retail space was added along Orchard Road with the opening of ION Orchard, Orchard Central, 313@Somerset and Mandarin Gallery.

However, the firm projects a dip in supply of retail space next year to 165,000 square feet, which is about seven per cent of some 2.4 million square feet of new retail space estimated to be available in 2010.

Outside of the city, it said most of the new supply will be concentrated in Resorts World Sentosa and Nex mall at Serangoon Central, posing limited pressure on other suburban malls.

Retail sector expected to hold up in 2010

Source : Business Times – 17 Dec 2009

Analysts forecast a smaller drop in prime retail rents by end-2009

The retail sector – the most resilient segment of the local property market in 2009 – should hold up in 2010 as well.

Most analysts expect prime retail rents to end 2009 down 3-6 per cent – a much smaller drop than they predicted a year ago. A poll of property analysts in late 2008 showed prime retail rents were expected to fall 5 to 13 per cent this year.

Now, heading into 2010, the retail sector is again expected to put up a strong showing, even as rents in sub-sectors such as offices take a further beating.

Prime retail rents are expected to stay flat for the most part, though some analysts are predicting rises of up to 10 per cent.

Rents at suburban malls, on the other hand, are expected to climb, as consumer spending at these malls is thought to be more resilient.

‘Prime retail rents in Orchard Road and Scotts Road and other city areas are likely to drift, with little change, due to more supply,’ said Anna Lee, DTZ’s associate director for retail. ‘Suburban rents may pick up.’

‘There is still healthy demand from local residents and this in turn draws potential tenants and helps stabilise suburban retail rents.’

Cushman & Wakefield Singapore’s director of research Ang Choon Beng agrees prime rents should stay firm in 2010. He is also more bullish than most analysts, predicting a 5 to 10 per cent increase in rents in 2010.

‘We are in agreement with consensus opinion that Singapore’s economy will grow strongly in 2010,’ he said.

‘This will lead to renewed confidence among retailers, keeping prime retail rents firm.’

Retail rents have not fallen sharply this year, despite a large amount of space coming on stream, because consumer spending has been resilient, says OCBC Investment Research analyst Foo Sze Ming.

An estimated 2 million sq ft of new retail space was completed in 2009. And it is expected that another 2.1 to 2.3 million sq ft will be added next year.

But mall operators will be heartened that new supply in 2009 was well-absorbed by the market, and that occupancy rates at new retail malls have been strong.

For instance, Ion Orchard and Orchard Central have achieved respective occupancy rates of 96 per cent and 80-plus per cent. Other new malls, including Tampines 1, Iluma and City Square Mall, have also put up decent showings.

‘While the upcoming supply of new space seems high, an oversupply situation is unlikely as we believe that these spaces can be absorbed by the market,’ said OCBC’s Mr Foo. ‘Some upcoming malls have already secured strong pre-commitments from tenants, well ahead of completion.’

He cited Nex and Marina Bay Link Mall, which have already secured respective lease commitments for more than 70 and 55 per cent of their space.

Analysts reckon retail yields are likely to well supported in the future.

‘They have ranged between 5 and 6.5 per cent over the past 10 years and are now closer to the 5-5.8 per cent range,’ said DBS Group Research analysts Lock Mun Yee and Derek Tan.

‘With limited supply and a robust outlook, we anticipate retail property yields to hover within a tight range.’

And capital values are expected to be stable in 2010. According to URA statistics, retail capital values fell 1.2 per cent quarter-on-quarter in Q3 2009, taking the drop from the peak to 12 per cent.

The decline has been greater for centrally located properties, with values down 12 per cent, versus an 11 per cent dip in fringe areas.

‘We expect capital values will be stable because most retail properties are held by big developers and Reits (real estate investment trusts,’ said DTZ’s Ms Lee.

Clementi Mall tender attracts 6 bids

Source : Channel NewsAsia – 10 Nov 2009

A total of six bids have been submitted for the Clementi Mall development.

The highest bid came from CM Domain Pte Ltd at S$541.898 million.

CM Domain is a fully-owned subsidiary of Singapore Press Holdings, with investment holding being its principal business.

The lowest bid came from Sim Lian Holdings at S$170 million.

Other bidders included Titanium (AMT) Pte Ltd, Guthrie (Anshan) Pte Ltd, FC Retail Trustee Pte Ltd, HSBC Institutional Trust Services and Lend Lease Retail Investments.

Clementi Mall, located at the junction of Commonwealth Avenue West and Clementi Avenue 3, in the western region of Singapore, is being sold on a 99-year lease. It is a retail mall being developed at Clementi Town Centre.

According to Jones Lang LaSalle, which is managing the sale, the permissible Gross Floor Area (GFA) is approximately 25,000 square metres.

It said the eventual buyer will have the full flexibility to plan and strategise the theme and concept, internal finishes and layout to maximise the full potential of the property.

Orchard Road retail rents continue slide

Source : Business Times – 15 Sep 2009

But competition for limited availability drives up Q3 prime suburban rents 0.7%

PRIME Orchard Road rents fell 3 per cent quarter-on-quarter to $32.90 per square foot per month (psf pm) in Q3 2009, a new report from CB Richard Ellis (CBRE) shows.

This is in line with the 2.9 per cent quarter-on-quarter fall in prime Orchard Road rents seen in Q2.

However, in a reversal of the rental trend, prime suburban rents inched up 0.7 per cent quarter-on-quarter to average $28.50 psf pm in Q3 2009, driven by competition for limited availability. In view of this, CBRE now expects prime suburban rents to contract by 1-2 per cent this year, compared with its earlier estimate of a 2-3 per cent contraction.

By contrast, CBRE is maintaining its forecast for a 10-12 per cent decline in prime Orchard Road rents for the whole of this year. Including a further decline of not more than 5 per cent expected for next year, the eventual rental trough for prime Orchard Road retail space should not be less than the $30 psf pm-level, the firm said.

‘The last time Prime Orchard Road rents fell below $30 psf pm was from 1998 to mid-2000, when the effects of the Asian Financial Crisis were most felt,’ noted the property firm in its report. ‘Since the turn of the millennium, prime Orchard Road rents have shown a certain resilience. Even during the global electronics downturn and Sars in 2002/2003, these rents did not dip below $31.50 psf pm.’

CBRE also noted that with the close of the third quarter, leasing activities for the new Orchard Road space have somewhat stabilised and most tenancies have been committed.

Mandarin Gallery is almost 100 per cent occupied ahead of its pre-Christmas opening. Knightsbridge announced that it is 50 per cent pre- committed and expects the remaining leases to be finalised by Q3 2009. TripleOne Somerset is 60 per cent pre-let, while, across the street, 313@Somerset announced that it is 90 per cent leased ahead of its late-November opening.

Two other major Orchard Road malls, Ion Orchard and Orchard Central, are already open for business – although both of them were not fully leased yet as of the last updates provided.

Come 2010, the two upcoming integrated resorts will offer visitors and locals another two brand new and distinct shopping destinations, said Letty Lee, CBRE’s director of retail services.

‘A line-up of old and new international brands along with local offerings and emerging labels is widely expected,’ she said. ‘The developments willreach out to a more cosmopolitan clientele, and is likely to offer a different shopping experience from what we have encountered locally so far.

It is an exciting time for the retail scene.’

Start-ups feel at home in Stamford House

Source : Straits Times – 29 Jul 2009

STAMFORD House might as well bill itself as The Entrepreneur Mall now.

About half of the 51 units in the historic three-storey building are rented to first-time business owners, drawn there by the low rents and short-term leases.

Last month, a company importing organic cosmetics set up its first retail store in the block; this weekend, a 20-year-old entrepreneur will debut her concept store, where members have the right to pick from a range of free product samples.

The block made its name as a ‘go to’ place for furniture in the late 1990s, with big tenants like Picket & Rail and Pennsylvania House.

But they started moving out because of low traffic arising from a lack of publicity, and a high tenant turnover due to the short-term leases. A clutch of local designers moved in next, only to start leaving for similar reasons.

Stamford House’s short-term leases last up to a year, instead of the market practice of two or three years with a high chance of renewal thrown in, said Mr Colin Tan, director of research and consultancy at real estate consultancy Chesterton Suntec International.

The leases are short because the building is on the Reserve List of the Government Land Sales Programme, and could be redeveloped the moment a developer offers the minimum bid.

Mr Tan said few established retailers would accept such short leases; they do not find it worth their while to renovate the premises for only a short stay.

It is thus no surprise that the building has become popular with start-ups looking to fine-tune their businesses.

‘It is located in the heart of town, with relatively low rents,’ he said. ‘The more start-ups keep costs down, the longer they will survive. This is critical in the first few years.’

He noted that rents at Stamford House are half, or even less than half, those in nearby malls like Raffles City.

The low rent and the short lease attracted Ms Elfanie Tan, who pays $7 per sq ft to run Fr3b, the concept store which will give away free product samples to its registered members. She said: ‘The building has the feel of a hotel and rent is low. It made it possible to start. If the rent were higher, I might have been too scared to take it up.’

For home-grown designer Jo Soh, 33, a month’s lease was enough time to find out how her creations under the Hansel label would fare in the market.

Now thinking of opening her first permanent store, she said: ‘The response at Stamford was good. Now we know opening a store is an option.’

The Singapore Land Authority, the building’s landlord, said the high tenant turnover has not dampened occupancy, now at more than 90 per cent.

Its spokesman said: ‘We do not limit the trades allowed or specially source for tenants of a particular trade. The current trade mix evolved on its own based on market demand and supply.’

Some current tenants are, however, disgruntled with Stamford House’s lack of identity. Make-up Forever manager Alicia Chong said of the short leases: ‘I’ve put off renovating for many years. The landlord keeps saying rents might not be renewed, but then they are. It’s frustrating not knowing what will happen next.’

Negative take-up shrinks in Q2: URA

Source : Business Times – 25 Jul 2009

THE office market has posted a third consecutive quarter of negative take-up, according to government data for Q2. However, the negative take-up of 247,570 square feet in the second quarter was smaller than the 322,917 sq ft in Q1 and the 365,973 sq ft in Q4 last year.

CB Richard Ellis executive director Li Hiaw Ho expects take-up to remain in negative territory for the rest of the year. ‘The impact of downsizing will be felt in the office sector for the next six months at least.’

Urban Redevelopment Authority (URA) figures show that the islandwide vacancy rate for offices continued to increase, hitting 10.8 per cent as at end-Q2 2009, compared with 10 per cent at end-Q1 2009 and a low of 7.3 per cent in second half 2007.

The vacancy rate for Category 1 space – office space in buildings in the Downtown Core and Orchard Planning Area which are relatively modern or recently refurbished, command relatively high rentals and have large floor plate size and gross floor area – was 6 per cent at end-Q2, up from 5.3 per cent at end-Q1. The vacancy rate for Cat 2 space (the rest of Singapore’s office stock) rose from 11 per cent at end-Q1 to 11.9 per cent at end-Q2.

The median rental contracted in Q2 for Cat 1 offices was $10.59 per square foot per month, down 8.4 per cent from the preceding quarter. The drop was smaller than a 12 per cent decline in Q1.

However, the median rental for Cat 2 space fell 7.6 per cent to $5.11 psf per month in Q2 – a bigger fall compared with the 6.9 per cent drop in Q1.

Cat 1 median rental has eased nearly 28 per cent from the peak of $14.70 psf in Q2 2008. Over the same period, the Cat 2 median rental has slipped 21 per cent.

Looking ahead, property consultants are predicting gentler declines in office rents for the rest of 2009, while cautioning that the office market is unlikely to be out of the woods until demand turns positive.

In the retail property sector, the completion of ION Orchard and Orchard Central caused the vacancy rate for shop space in the Orchard Planning Area to spike to 16.2 per cent at end-Q2 from 4.7 per cent a quarter earlier. URA pointed to the lag time taken for tenants to retrofit and occupy the shop space in the newly completed malls.

CBRE’s Mr Li said: ‘These new malls already have high pre-commitment levels and vacancy rates in Orchard should move back to the 90 per cent level within a year, once tenants have moved in and started operations.’

The median rental signed in Q2 eased 2.4 per cent over Q1 in Orchard and Rest of City Area and fell a smaller one per cent in Outside City Area.

URA’s rental indices for flatted factories and warehouses slid 4.2 per cent and 9.2 per cent respectively in Q2 over Q1. Warehouse vacancy rate rose from 7 per cent in Q1 to 9 per cent in Q2. Factory vacancy increased from 7 per cent to 7.8 per cent over the same period.

Far East scheme helps new entrepreneurs

Source : Business Times – 15 Jul 2009

Tenants pay for space in its malls with preference shares, not rent

FAR East Organization has launched a scheme that allows budding entrepreneurs to pay for space in its malls with preference shares instead of regular rents.

Under the Rental Space for Equity Programme – a first for Singapore retail market – selected tenants will sign a two or three-year lease with Far East. To pay for space, the tenants will issue redeemable, convertible, cumulative, preference shares (RCCPS) to the company in lieu of monthly base rent. The shares come with a cumulative dividend of 4 per cent per year.

Tenants can choose to redeem the RCCPS after one or two years or at the end of the lease period. When redeeming the shares, they will pay all the rent they owe, as well as the 4 per cent a year interest they accumulated.

Alternatively, the RCCPS may be converted to ordinary shares, which means Far East will own a stake in the retail business. The choice will be left to tenants.

Far East will allocate up to 5 per cent of rental space at six of its malls for the scheme – Central, Far East Square, Orchard Central, Pacific Plaza, Square 2 and West Coast Plaza.

The programme aims to encourage the entry of new brands and retailers into the retail scene here.

Far East Organization’s executive director of investment properties Eddie Yong said the group has always supported businesses in its own way.

‘We always want the best for our tenants and to see them grow,’ he said. ‘That is why we are responding to the needs of the market with the Rental Space for Equity Programme. We see it as a pro-active partnership by lowering the entry barrier for prospective tenants who have exciting brands or concepts.’

Target participants include vendors with new brands, existing retailers who want to expand and budding entrepreneurs who want to get a headstart.

For first-time entrepreneurs, Far East has identified an audit firm to help them form their new company and will help defray these administrative expenses.

Mall owner offers shares-for-rent plan

Source : Straits Times – 15 Jul 2009

A LEADING landlord has come up with a novel way to help eligible tenants defer rent for up to three years.

New tenants of Far East Organization may be able to sell shares of their companies, worth their base rental amounts, to their landlord each month.

They will have to buy back the shares not more than three years later, at an interest rate of 4 per cent per annum.

Alternatively, if both parties agree, Far East will become a co-owner of the companies. Sales are capped at 49 per cent of their paid-up capital or $500,000, whichever is lower.

Tenants have to register online at www.fareastretail.com.sg and go through an evaluation process before being selected. Current tenants who want to expand can also apply.

Far East is the first mall owner to offer such a scheme. Other operators, like Orchard Turn Developments and Asia Malls, which run ION Orchard and Tampines 1, offered rental rebates and waivers to help tenants open in time with the opening of the malls.

Far East said the scheme is aimed at budding designers who need a head start, international retailers with new concepts and existing retailers who want to expand.

Only 5 per cent of rental space in six of its malls – namely Central, Far East Square, Orchard Central, Pacific Plaza, Square 2 and West Coast Plaza – will be allocated to it.

This comes up to 45,000 sq ft. Depending on the size of each unit, the scheme would cater to about 90 tenants.

‘It is a support programme,’ said Far East’s executive director of investment properties Eddie Yong.

‘Running a business is like a marathon. We are just providing a helping hand to get them off the starting block or encourage them to start the race, by easing cash flow constraints.’

He stressed: ‘It is not our intention to own or run our tenant’s business.’

In fact, business owners like 28-year-old Sam Su see the scheme as a possible way to snag a good location at deferred rents.

‘It is pretty attractive because rental is the largest cost when it comes to opening a business here,’ said Mr Su, who owns T.S. Rarity, a men’s apparel store at 45 Haji Lane. ‘Take away rental, and cash flow will be eased a great deal. I will take it if the location is good.’

The owner of Don’s Pie, a popular pie shop located in the business district, is also mulling over the option. Mr Don Lim, 50, was forced to close down two outlets after ‘rental killed (my) business’. He now has one outlet near Far East Square.

‘With this scheme, I can wait till business is good before I pay rent,’ he said.

Analysts say that the scheme could be a way for the property developer to keep rents high.

‘The motivation of this scheme is to maintain rents and fill up the shopping centre,’ said Mr Colin Tan, director of research and consultancy at real estate consultancy Chesterton Suntec International. ‘Landlords will not have to reduce rents because tenants unable to afford market rent can now do so with such a scheme.

‘Many landlords are reluctant to lower rent because if word spreads, it will be hard for them to demand high rents from those who can afford it.’

The Singapore Retailers Association’s executive director Lau Chuen Wei said it would help companies with cash flow.

HOW THE SCHEME WORKS

FAR East’s executive director (property services) G.L. Yap explains:

The scenario

~ An eligible tenant signs a two- or three-year lease for a 1,000 sq ft unit at $15,000 per month ($15 psf).

The process

~ The tenant will be instructed to set up a new company.

~ Each month, he will issue company shares – named Redeemable, Convertible, Cumulative Preference Shares (RCCPS) – in lieu of rent. The value of each share depends on the structure of the company. Share issues will be capped at 49 per cent of the paid-up capital, or $500,000, whichever is lower.

~ The tenant can opt to buy back the shares after a set period or after the lease expires at the original selling price plus interest of 4 per cent per annum. Alternatively, he can convert the RCCPS into ordinary shares at the current market value of the company.

~ He will now start paying the rent in cash.

~ If the business fails at any time, the losses will be shared among shareholders – including Far East Organization – in proportions based on the structure of the company.

Landlord-tenant divide

Source : Straits Times – 15 Jul 2009

IN THE natural order of things in the retail world, a landlord protects his tenants, and this traditionally has meant not cannibalising their business.

That one big mall owner would have information on its tenants’ takings – via a central cash register system – and set up competing businesses through a subsidiary, makes news, and more so when such a move raises a stink among the tenants.

I am referring to the controversy of Far East Organization’s subsidiary Kitchen Language (KL) and its opening of five eateries – three Tully’s coffee joints and two sandwich shop Quiznos – in its malls including Orchard Central over the last eight months.

Far East said it brought the brands into Singapore so consumers can have wider choice. It also gave the assurance that Far East does not reveal tenants’ takings to KL.

I had interviewed one upset Far East tenant, sandwich chain Subway, and reported on the alleged conflict of interest in The Sunday Times on June 7.

The other major mall operators contacted – CapitaLand Retail, Asia Malls, Lend Lease and Frasers Centrepoint – said they are not in competing businesses with their tenants.

This led to a second article on June 20 reporting on how at least four retailers – Subway, O’Briens Irish Sandwich Bars, Starbucks Coffee and Bakerzin – are now proposing new protection clauses in their tenancy agreements.

Lawyers and real estate consultants interviewed are divided on whether Far East’s behaviour is anti-competitive. I’m no legal expert so I would not want to comment on the legality of what Far East did. But the episode does raise questions about what makes good business practice.

The tenants’ concerns appear justified. Landlords have access to sales figures of all tenants in their malls. The information is used for calculating rent, which is made up of a fixed basic rate and a variable tied to merchants’ gross turnover.

Over the last five years, advances in technology have given landlords timely, accurate and granular sales information. A central point-of-sale (POS) system that connects to the tills of all the tenants in a mall gives sales feeds to mall owners daily, down to the amount and time of each transaction.

Some real estate consultants have dismissed the value of such data. But tenants are making a Bronx cheer. Justifiably so, it appears.

For instance, with daily sales feeds, landlords can gauge how lucrative tenants’ businesses are before deciding to plunge into any retail business.

The landlord can also glean consumer spending habits from week to week or month to month by studying tenants’ sales – without having to pay a cent for market research. That is all sweat off their backs, the tenants argue.

Some real estate consultants, though, counter that landlords can just as easily monitor shopper traffic by having someone stand outside a retailer’s store, quashing tenants’ protests of intrusive snooping.

The issue of tenants’ free choice – of getting into a mall or not – is also moot: Having their tills tied to the landlord’s central POS is mandatory under most tenancy agreements.

Besides, there is the promise of symbiosis from the shared information. For instance, when a mall operator organises a midnight sale, it wants to know immediately how many shoppers and retailers benefited. Such insights will allow the mall operator to better cluster tenants by business type and plan promotions to boost shopper traffic and sales.

Given all this, I’d think it’s not too much to ask of a landlord not to compete with its tenants. After all, a mall’s success is also determined by how well shops do. Yes, consumers might get more choice if landlords were to bring in new brands, but is it worth it if the result is unhappy tenants?

As Singapore Retailers Association’s executive director Lau Chuen Wei said: ‘Let landlords carry on with their core business of building good relationships with tenants for their mutual success and let tenants carry on with their own businesses.’

Smaller drop in prime Orchard Road rents expected

Source : Straits Times – 14 Jul 2009

PRIME Orchard Road rents are tipped to fall about 10 per cent to 12 per cent this year, and not up to 20 per cent as forecast earlier, said CB Richard Ellis (CBRE).

The consultancy pointed to the healthy demand for existing shop space and the high pre-commitment levels seen at yet-to-be completed malls.

Mandarin Gallery, for instance, is 93 per cent pre-committed.

Prime Orchard Road rents fell 6 per cent in the first half of this year and now average $33.90 per sq ft (psf).

CBRE painted a gloomy picture of the retail market in March, saying it was looking at a 15 per cent to 20 per cent fall in Orchard Road prime rents this year.

It cited a weakening economy, a shift away from luxury goods and falling visitor arrivals. Many retailers were then crying out for rent cuts.

Major retailer RSH Group recently said that it is still renewing shop rents at higher levels even though its profits have fallen. At some locations, it may have to downsize its stores.

But CBRE has since become more upbeat. The retail landscape along Orchard Road is about to hot up with plush new malls – which are said to be signing leases at rents lower than last year’s – nearing completion.

Orchard Central has ’soft-opened’ while Ion Orchard, Mandarin Gallery and 313@Somerset look ready to open in the next six months.

And existing malls on Orchard Road are trying to keep up with the new arrivals.

The Heeren has announced revamp plans, while Ngee Ann City is sprucing up the former Sparks space into a chic lifestyle cluster catering to young adults, said CBRE.

Suburban malls are doing far better. Rents fell just 2.4 per cent in the first half.

Prime suburban rents remained unchanged at $28.30 psf a month on average in the second quarter. Support came from the limited upcoming suburban supply, said CBRE.

Suburban malls owned by real estate investment trusts are under pressure to be yield-accretive and are therefore less likely to drop rents drastically, said CBRE.

The consultancy has also moderated its forecasts for suburban mall rents, saying they are likely to contract by 5 per cent to 6 per cent this year, down from an earlier estimate of a 10 per cent to 15 per cent decline.

CBRE expects smaller fall in retail rents this year

Source : Business Times – 14 Jul 2009

It cites healthy demand for Orchard Rd space, limited suburban supply

CB RICHARD Ellis (CBRE) now expects Orchard Road retail rents to fall 10-12 per cent this year – less than its earlier estimate of 15-20 per cent.

‘We expect the rate of rental decline for prime space along Orchard Road to ease given the healthy demand for existing shop space as well as high pre-commitment levels at yet-to-be completed malls,’ CBRE said in a report released yesterday.

The firm now also expects suburban mall rents to contract just 5-6 per cent for the whole year – down from its earlier estimate of 10-15 per cent.

Prime Orchard Road rents fell to $33.90 per sq ft (psf) per month on average in Q2 2009 – down 2.9 per cent quarter-on-quarter and 7.8 per cent year-on-year. This means that according to CBRE’s data, prime Orchard Road rents fell 6 per cent in the first half of this year.

Prime suburban rents were unchanged in Q2, averaging $28.30 psf pm. They were supported by the limited pipeline of supply in the suburbs, and the fact that suburban malls owned by real estate investment trusts (Reits) are under pressure to be yield-accretive and so are less likely to drop rents drastically. Prime suburban rents dipped a marginal 2.4 per cent in H1 2009.

The three new major malls coming up in Orchard Road have so far reported healthy leasing figures. Ion Orchard said recently that it is 94 per cent leased. And at the other end of Orchard Road, 80 per cent of the space at Orchard Central is committed. 313@Somerset, which is due to open at year-end, has said that it is 85 per cent leased so far and will be 100 per cent let by the time it opens.

Analysts have said that the fall in retail rents is expected to moderate in H2 2009 with seasonal activities such as the Great Singapore Sale, F1 Grand Prix and Christmas festive season.

Far East Organization launches scheme to help new retailers

Source : Channel NewsAsia – 14 Jul 2009

Property developer Far East Organization has launched a scheme to encourage start-ups at its shopping malls. Instead of paying rent, these tenants can issue preference shares to the developer for up to three years.

Tenants at six Far East Organization malls – including the new Orchard Central – can now pay rent in shares, instead of cash. The other participating malls are Central, Far East Square, Pacific Plaza, Square 2 and West Coast Plaza.

Eddie Yong, executive director, Investment Properties, Far East Organization, said: “We are fulfilling the market desire to have more variety of shops and tenants in Singapore shopping malls.

“With the opening of Orchard Central, we feel that we have a spread of malls across Singapore to offer our would-be tenants a choice of suitable spaces for them to consider setting up shop.”

Under the new Rental Space for Equity Programme, tenants will sign a two- or three-year lease with Far East. During this period, they will issue redeemable, convertible and cumulative preference shares instead of paying their monthly base rent.

Tenants can issue these shares up to a cap of 49 per cent of their paid-up capital or S$500,000, depending on which is lower. At the end of the lease period, they can buy back those shares by paying the full rent, plus 4 per cent interest.

Alternatively, they can ask Far East to be a partner in the business, in which case the developer will convert its preference shares into ordinary shares in the retailer’s firm.

Far East has set aside 5 per cent of the space in each of the six malls for the scheme – equivalent to about S$6 million of rental space annually.

The programme is open to first-time retailers as well as existing retailers who want to expand their presence.

Retail rents continue to drop in Q2

Source : Business Times – 4 Jul 2009

RETAIL rents continued to fall in the second quarter of 2009 amid economic contraction and new supply, according to a report released yesterday by DTZ Research.

Prime first-storey rents in the Orchard/Scotts Road area fell 0.8 per cent to $39.60 per sq ft per month (psf pm). This was a slower pace of decline, after rents fell 4.8 per cent in Q1. Rents for second-storey space fell 4.5 per cent in Q2 – also less than a 6.4 per cent fall in Q1. Rents in suburban areas fell marginally in Q2, supported by resident catchments. Prime first-storey rents eased 0.6 per cent in Q2 – the same as the fall in Q1.

However, rents in ‘other city areas’ fell more in Q2 than Q1, partly due to new supply that will be completed in the second half of 2009. Prime first-storey rents declined 3.1 per cent to $25.40 psf pm in Q2, more than the previous quarter’s fall of 2.2 per cent. 1.3 million sq ft or 56 per cent of new retail space that will be completed in the rest of the year will be in ‘other city areas’, DTZ estimates.

Anna Lee, associate director of retail at DTZ, said that many retailers and F&B operators have delayed expansion plans or changed their business strategies because of the economic downturn. Some F&B operators have or are considering moving to business parks, where rents are much lower and there is a considerable worker catchment to tap on, she added.

Looking forward, the retail sector will remain under pressure this year because of the downturn in visitor arrivals and the economic contraction, said Chua Chor Hoon, head of DTZ South-east Asia research. ‘Orchard/Scotts Road and other city areas will be more affected due to substantial new supply,’ Ms Chua said.

Other analysts likewise expect retail rents to keep falling this year, with the prime Orchard/ Scotts Road area tipped to be worst hit.

Macquarie Research, for example, said in a June 15 report that it expects prime Orchard Road rents to fall 10-15 per cent this year given new supply coming on stream. For suburban retail rents, a smaller 5-10 per cent year-on-year fall is expected.

‘Historically, retail rent growth is closely aligned with retail sales growth,’ said the firm’s property analysts Tuck Yin Soong and Elaine Cheong.

Red boxes like red packets for HDB shops

Source : Straits Times – 6 Jul 2009

MR Daniel Cheong, 37, has an optical shop at Marine Parade Central, rented from the Housing Development Board. But he is a landlord too. For the past two years, he has been leasing the space in front of his store to a woman selling mobile phones and accessories.

Since October 2007, he has paid about $100 a month to the town council for that space, marked out as a red box, and lets it out for as much as $1,500.

Mr Cheong says the money helps pay for his own rent and utilities bill, which can go up to $12,000 a month.

His tenant, who wanted to be known only as Lynn, had her own shop nearby until the rent there bled her dry. Being able to keep her business at a fraction of its original cost has been a life-saver, says the 32-year-old. ‘As long as I don’t affect his business, I think it’s fine.’

Mr Cheong said: ‘We need only the shop space, not the outside. We’re not earning much renting out the outdoor area, we’re just trying to stay afloat and make ends meet since costs are so high.’

Heartlanders will be familiar with the red or yellow boxes that line the walkways in neighbourhood centres. Of the 20 shops in Mr Cheong’s neighbourhood, more than half have leased their outdoor space, for about $1,500 a month.

Some shops can charge as high as $3,000 a month because they front the hawker centre, for example. Not bad for a space measuring just 2m by 1m.

The result: Makeshift stalls dot neighbourhoods, selling everything from baby clothes and lingerie, to handbags and toiletries. The most familiar sight is counters selling cellphones and accessories.

But what used to be a good thing for shopkeepers has become more of a lifebelt. The recession has hit trade and shops need these tenants to help get by, they say.

However, even that source of income is hard to come by in some places: A shopkeeper in Jurong West Avenue1 only recently managed to procure a tenant selling wallets and clothes after a long dry spell. The 50-year-old, who runs a store selling religious artefacts, said in Mandarin: ‘Times are bad, so there isn’t high demand anymore.’

Also, since a clampdown on cluttering shophouse walkways, tenants are finding it hard to store their wares after hours – unless the shopowner has space indoors.

One Ghim Moh Road shopowner who sells electrical appliances thinks such stalls bring in more than just help with the rent: variety brings in the crowds.

He has 12 regular tenants, mainly retirees and housewives whose husbands have been retrenched from work. They book fixed days to come and hawk wares like clothing, lingerie and CDs.

On a few occasions, he has let the space to salesmen looking to hawk wares such as hotplates. He has even had requests from durian sellers.

‘The products I sell can’t compete with Courts and Best Denki. Besides, this estate has more elderly people. How can I make money if I don’t attract crowds?’

For some tenants, the stalls are a good way to pass the day. Madam Ti, for example, has been running a tailoring counter in the display area outside a pet shop at Marine Parade Central for the past five years. All she has is a table for her sewing machine, a counter for all the clothes and a plastic chair to sit on. ‘Business is all right and I have my regulars. It helps me pass the time,’ said the seamstress, who is in her early 60s.

But the recession has taken its toll on tenants too. Despite cheaper rent and more flexible hours – many work only half a day – people are spending less.

An Ang Mo Kio Central tenant who sells T-shirts said she used to pull in as much as $2,000 on a good day last year. Now, she barely makes a quarter of that.

There are some rules landlords have to abide by, and a particular one has them riled: Their tenants must be selling more or less the same stuff as the main shop.

Said Mr Cheong: ‘It’s a rule that really inconveniences people, and it takes away whatever little we are doing to help our businesses survive.’

A Ghim Moh shopowner selling garments said it was not practical to lease the space to a competitor. ‘If they were selling the same things as me, I wouldn’t allow it. It would hurt my business because they can afford to sell cheaper.’

Over at Tampines Central, for example, about a third of the tenants do not sell items similar to their landlords.

The Ghim Moh shopkeeper who sells electrical appliances has been fined three times, paying $300 in all for this, but remains adamant it was worth his while.

But there are shopowners wary of flouting the rules. A shopkeeper selling women’s clothing in Bukit Batok Central has repeatedly refused offers to lease her outdoor display area to people wanting to sell phones. One deterrent: The office of Jurong Town Council which conducts regular patrols is just a stone’s throw away.

Jurong West textile merchant Mr Ng, 52, has been saying no to prospective tenants too. ‘I know it’s against the by-laws and since officers patrol regularly, I don’t want to get into trouble.’

Checks are carried out by Certis Cisco officers or officers from the various town councils. While most inspections are focused on ensuring cluttered walkways do not breach fire safety regulations, other violations, such as leasing space to unrelated trades, are also picked up.

Residents, too, alert the councils if they see displays obstructing walkways.

Shopowners who have to deal with the keener competition are not too flustered.

Said a garment shopkeeper in Marine Parade: ‘We have to make sure we appeal to a different market by selling clothes of a higher quality and bring in things they don’t have, so we have more variety.’

Said Mr Harris Cheong, 28, of the phone counters sprouting up next to his phone store in Hougang: ‘We’re targeting different markets. It’s comparable between a hawker centre and a restaurant. Our customers trust we are not a ‘hit and run’ store. The only thing we lose out on in terms of pricing are the accessories. Other than that, we don’t suffer much.’

While landlord and tenant have a mutually rewarding relationship, the real beneficiaries of the red box phenomenon are the neighbourhood residents who now have cheaper choices and variety.

Student Gareth Goh, 21, who lives in Toa Payoh, said: ‘The shops add to the atmosphere…It feels more Singaporean.’

Taxi driver Tan Eng Wah, 36, agreed, adding: ‘I’ll go to a proper shop if I need something of higher quality.’

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There are some rules landlords have to abide by, and one particular one has them riled: Their tenants must be selling more or less the same stuff as the main shop.

Mall rents down? Not for lease renewals

Source : Straits Times – 6 Jul 2009

THE new malls taking shape in Singapore are offering lower rents to lure tenants in trying times but existing complexes are demanding higher renewal rates, said a senior executive of retail giant RSH Group.

Chief operating officer Kesri Kapur pointed to a paradox in the local market: Most retailers are grappling with falling profits, yet most lease renewals are done at higher levels.

One suburban mall is even asking RSH for 20per cent more to renew the lease of a shop of less than 3,000 sq ft.

‘We are moving out of that particular location. Obviously, business is not what we would have expected when we signed the lease,’ said Mr Kapur.

‘This is one example where we have taken a decision… There are a couple of other locations that we are reviewing.’

Mr Kapur conceded that landlords may have lowered their expectations of how much more they might get in rent renewals, but they are still renewing leases at a higher level.

‘Whenever we renew rents in Orchard Road, the rents have not declined,’ he said. ‘For the newer malls, for those who have not signed before December, their offers would probably be better.’

A typical retail lease lasts three years so a higher rent now means one above the level committed three years ago.

Retail rents have indeed fallen from the peak rates of last year, but they may not all have dropped to levels done three years ago.

According to consultancy DTZ, rents of prime retail space in Orchard Road, Scotts Road and other city areas have fallen by more than 6per cent from last year’s peak and are close to 2006 levels.

But suburban rents have fallen by only 2.1per cent and are at 2007 levels.

Property experts said the rental declines would be more evident in malls that still have space to lease.

These include new complexes, such as those in the Orchard strip, as well as nearby existing malls that may have lost some tenants to the recent arrivals.

DTZ’s associate director of retail, Ms Anna Lee, said in a report on Friday that many retailers and food and beverage (F&B) operators have delayed expansion plans or changed their business strategies under the pressure of the economic downturn.

‘Some F&B operators have or are considering moving to business parks, where rents are much lower and the worker catchment is considerable,’ she said.

More retailers are also feeling the pressure of having to move out of unprofitable locations, said an industry source.

The Singapore Retailers Association had earlier called for landlords to lower rents, saying many firms will go under if something is not done.

Executive director Lau Chuen Wei said the association started its ‘crusade’ to highlight to landlords that their high rents may cause the closure of some retail stores – and cost retail jobs.

They have since seen indications that some landlords are more open to exploring creative ways of collaboration, though most would not reduce rents.

‘However, we also hear that new sign-ups have seen more success in achieving rents that are lower than initially offered,’ she said.

Mr Kapur said he anticipates consumer demand to be challenging in the next 12 to 18 months.

‘Everybody is facing challenges now. What is important is whether you can hold hands and work together.’

HDB gives small retailers a leg up with new initiatives

Source : Business Times – 2 July 2009

THE Housing and Development Board (HDB) held its inaugural retail seminar yesterday – to help heartland retailers remain competitive and relevant.

Through networking and input from successful entrepreneurs, HDB hopes to create awareness of opportunities available to heartland retailers and inspire them to improve their operations.

‘This is a key way for us to reach the retailers themselves,’ said Senior Minister of State for National Development and Education Grace Fu, who was guest of honour at the seminar.

‘Besides looking at hardware upgrading and improving facilities, it is important for shopowners to have the opportunity to upgrade their retail management skills.’

HDB also launched the website Where2Shop@HDB – an online directory of heartland shops in the 148 towns and neighbourhood centres island-wide.

Through a simple search, users can find products and services provided by HDB shops in different districts. Transport advice and maps will be offered alongside the information.

Ms Fu said: ‘Small retailers have to keep up with the challenge of the newer and bigger shopping complexes coming up. We are helping them by providing a directory, consolidating businesses, helping them get listed on line and hopefully getting the mind-share of younger shoppers who are Internet savvy.’

While the government is helping retailers through various schemes, it is vital that retailers be receptive to new ideas so as to create new markets for themselves, Ms Fu said.

Where2Shop@HDB is looking at listing more than 10,000 heartland shops.

Asked whether HDB will host the site in a language other than English, Ms Fu said: ‘We will definitely consider doing so if there is positive feedback.’

Heartland stores get helping hand

Source : Straits Times – 2 July 2009

HEARTLAND stores, which are struggling to stay afloat amid competition from major supermarket and convenience store chains as well as franchised outlets, are getting a helping hand.

The retailers will be given lessons on better sales practices, how to spruce up their displays, and how to keep up with latest retail trends.

A website was also launched yesterday, so members of the public can get quick information about the shops and what they sell. The website – www.hdb.gov.sg/where2shop – allows users to see what kind of products are being sold at shops across the island.

If a shop catches their interest, they can obtain its name, address, a map of its location and even directions to get there.

These measures, which will benefit more than 10,000 heartland retailers, are being paid for by the Housing Board. They are designed to help neighbourhood shops hold their own against everexpanding chains and shopping malls.

In recent years, names such as NTUC FairPrice, Sheng Siong and Giant have set up big, well-lit and well-stocked outlets in the heartland. Because of their size and operational efficiency, these chains have managed to keep prices low as well.

In addition, franchised convenience stores under the 7-Eleven, Cheers or iEcon banner, are also popping up everywhere. These stores, with their air-conditioned, neat interiors and 24/7 hours, are eating into the business of neighbourhood provision shops and others.

Yesterday, at the launch of the HDB Retail Seminar programme, Senior Minister of State for National Development and Education Grace Fu said heartland retailers need new tools to compete with big chains. The shopping habits of double-income families who value the convenience of large-scale shopping centres, rising affluence and the expectation of better service also threaten the Mom-and-Pop outlets in HDB estates, she said.

‘Many of them have to keep up with the challenges of the newer and bigger shopping complexes that are coming up, and will have to make improvements,’ Ms Fu said. Neighbourhood shops, she added, need to rethink their strategy.

The three-hour seminars – the first of which was held in Toa Payoh yesterday – should help. At these seminars, expert speakers give HDB retailers tips on how to improve their operations and identify business opportunities.

For example, retailers are advised to cooperate with other shops to run promotions, and to train their staff so that expansion can happen quickly when the opportunity arises. More such talks, which can cater to about 400 retailers at a time, will be held if there is demand.

Federation of Merchants’ Associations president Chua Ser Keng said the seminars were a good idea and would ‘increase interaction between shops and promote working together’.

‘On the whole, neighbourhood shops lack unity and do not cooperate with one another,’ he said. ‘That means missing out (on) possible business opportunities.’

Agreeing, Mr Jeffrey Kam, the owner of Rochelle, a shoe store in Yishun, said he had once tried to get shops near him to run promotions together, but failed because ‘no one wanted to go first’.

‘I am friendly with my neighbour, but it is hard to get everyone together to hold promotions at the same time,’ said the 44-year-old, who has seen business fall by 30 per cent since last year.

‘Everyone is doing his own thing.’

Ms Emiline Lee, 40, a retail lecturer at Ngee Ann Polytechnic, said neighbourhood shops really need help to stay relevant. Many, she said, are run-down and lack up-to-date products. She added that the HDB also stands to gain by helping them. ‘If HDB does not help them, that also means less rental revenue for it and fewer amenities for its residents.’

The big chains, meanwhile, welcome the help being given to smaller stores.

In fact, some, like the Prime Supermarket chain, will also attend the seminars.

Said Ms Ana Lei, assistant general manager at PSC Corporation, which runs the 100-store iEcon franchise: ‘It might actually increase customer flow to the neighbourhood areas and attract more customers to our outlets as well.’

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TOOLS TO COMPETE
~ Lessons on better sales practices
~ Tips on how to spruce up displays
~ Guidance on how to keep up with latest retail trends
~ A Web directory to help the public find the stores and learn about their products

Singapore rises to 18th in global ranking of retail rents

Source : Business Times – 2 July 2009

38% of top global retailers have presence here, CBRE survey finds

SINGAPORE moved up a notch to 18th position in a ranking of the world’s most expensive retail locations at end-Q1 2009, from 19th position at end-2008, according to CB Richard Ellis’s latest Global Retail Market View.

Singapore also emerged 11th in CBRE’s ranking of the top 15 Global Retail Cities as at the end of last year. This was based on the percentage of leading global retailers present in cities. London was number one (59 per cent), followed by Paris (50 per cent), New York (47 per cent) and Dubai (46 per cent). About 38 per cent of top global retailers have a presence in Singapore, slightly lower than Tokyo (39 per cent).

The average super prime retail rental value along Orchard Road at the end of the first quarter was US$408 per sq ft per annum, or S$51.80 psf a month.

Giving an update, CBRE in Singapore said the figure for end-Q2 2009 was S$49.80 psf per month, down 3.9 per cent from the preceding quarter and 8.5 per cent lower than in the year-ago period.

‘Going forward, we expect the rate of rental decline for prime space along Orchard Road to ease given the healthy demand for existing shop space as well as high pre-commitment levels seen at yet-to-be-completed malls,’ said CBRE’s director, retail services, Letty Lee.

About 2.5 million sq ft of new shop space will be completed here this year, followed by a further 2.2 million sq ft next year.

CBRE’s Global Retail Market View shows New York remains the world’s most expensive retail location, with an average rental value of US$1,800 psf per annum in the latest end-Q1 ranking. This was despite a 10 per cent year-on-year rental decline.

Hong Kong held on to second place. But Moscow overtook Tokyo to grab the third place. Paris ranked fourth and Tokyo fifth.

CBRE notes that prime retail rents have fallen in almost every region worldwide, as the global recession hits consumer sentiment and retail sales.

‘Demand for retail space has declined in most markets as consumers cut back on spending and unemployment continues to rise in many countries,’ it says.

‘Emerging and less established markets have been most significantly affected. Buenos Aires saw the largest annual decline in retail rents year on year with a drop of 37 per cent, followed by Warsaw with a 33 per cent decline and Washington with a 26 per cent decline.

‘While some markets have continued to experience year-on-year increases in retail rents, in many cases the current pressure is downward.’

Expanding despite the recession

Source : Straits Times – 29 Jun 2009

LOWER rents and operating costs are luring some entrepreneurs into expanding their food and beverage businesses, even in a recession year.

But because it is a recession year, they are going for mid-priced bistros, cafes and bars which are easier on the pocket than fine dining restaurants.

The next few months will see more new eateries opening, as more retail space comes onstream, said Restaurant Association of Singapore president Ang Kiam Meng, although he could not give exact figures.

Ion Orchard alone, for example, will have over 60 F&B outlets when it opens next month. At Orchard Central, about 35 per cent of its tenants are F&B outlets.

Mr Eric Cheng, executive director of real estate company HSR, estimated that rents for F&B tenants have dropped by about 16 per cent, with downtown rates ranging from $12 per sq ft (psf) to $25 psf, and $7 psf to $15 psf in the heartlands.

It was the softening rents downtown that led AC2 Group, which runs the Gelare chain of ice-cream cafes and steakhouse The Prime Society, to expand.

It opened Society Bistro at One Fullerton at the end of last month. Next month, it will open Society Bar at Chulia Street, and a casual dining seafood restaurant called The Nautical Project at Ion Orchard.

AC2’s director Ingrid Prasatya estimated she is paying about 10 per cent less in rent with the new outlets than if she had expanded last year.

Renovation and equipment costs have also come down. Restaurateur Michel Lu, for instance, reckons he has saved about 20 per cent on the cost of setting up his latest outlet, Hacienda Cafe, at Tanglin Village next month. It has also helped that some of his competition has closed or downsized, freeing up good culinary and managerial talent, he said.

Figures from the Statistics Department’s Catering Sales Index also show a general year-on-year increase in restaurant receipts every month since September last year.

A survey of 1,200 Singaporeans conducted between April and last month by UM Consulting also found nearly 60 per cent of respondents projecting they would spend the same amount, or more, on dining out in May, June and July.

Still, a recent Nielsen survey said spending on fresh food last year had gone up as more people ate at home to save money.

Trends are reflecting consumers’ desire to stretch their dollar. For example dishes cost from $8 to $20 at Society Bistro, while a gourmet sandwich at Hacienda Cafe will not cost more than $15, in line with Mr Lu’s other cafe, Prive.

‘During this recession, you don’t open $2 million restaurants, but something that has more cross-market appeal, and is more efficient to open,’ said Ms Shareen Khattar, managing director of the Marmalade Group, which is moving its Marmalade Pantry outlet at Palais Renaissance to a bigger space at Ion Orchard. The group is also looking to open two more Toast cafe outlets by the year-end.

Mr Ang of the Restaurant Association said landlords may slash rates even more. Also, the perennial manpower shortage has not been eased even with the economic crisis triggering job losses. Mr Ang, who owns the Jumbo seafood chain, said it had been difficult to find staff for two new eateries which opened this month, and another opening next month.

But for restaurateurs with the stomach for taking the plunge, Singaporeans still have an appetite for dining out. ‘People aren’t going to buy a Bentley but they still need to eat and drink,’ said Mr Lu.

Diners such as Ms Amizadai Lee, 31, a wedding video producer, are looking forward to a wider spread: ‘I think, particularly in a time like this, people would appreciate having more affordable options without compromising on quality and ambience.’