Recovery and rejuvenation a boost for Orchard Road and Cairnhill

The tourism industry in Singapore was dealt a severe blow at the height of the Covid pandemic. Official statistics show that incoming tourist arrivals fell from 4.8 million in the 4th quarter of 2019 to just 158,000 in 4th quarter of 2021. However, the reopening of international travel has led to a strong recovery, with inbound tourist numbers in the 4th quarter of 2022 reaching 2.6 million.

Retail rents, which provide an indication of the health of the retail market, took a dive from $11.08 per square feet per month (psf pm) in the 2nd quarter of 2020 to $9.01 psf pm in the 1st quarter of 2022. As the pandemic-related measures were gradually eased and domestic-led recovery surged, retail rents in the 4th quarter of 2022 rose to $9.81 psf pm, although still below pre-pandemic levels.

The Orchard Road shopping belt is not only a luxury shopping destination but is also surrounded by prime residential neighbourhoods such as Cairnhill, Newton, and the River Valley district, which are densely populated with schools, including St Joseph’s Institution Junior, Singapore Chinese Girls’ School, River Valley Primary School, and Catholic Junior College. Both Orchard and Cairnhill areas feature excellent public transport connectivity, with Orchard Road linked to the Orchard MRT Interchange on the North-South and Thomson-East Coast Lines, as well as the Somerset MRT Station on the North-South Line, while Cairnhill is near Newton MRT Interchange on the Downtown and North-South Lines.

The Orchard Road area is set to become even more vibrant in the future, with plans to establish distinct zones along the shopping belt. Some of the older developments in the area have also taken advantage of these rejuvenation plans, with Tanglin Shopping Centre sold to privately-held real estate investment firm Pacific Eagle Real Estate for $868 million, and Ming Arcade sold to Singapore family office Royal Group of Companies for $172 million – both setting new benchmarks for commercial en bloc sales in the Orchard Road area.

However, the Cairnhill and Orchard areas are both extremely mature and well-developed, limiting the supply of new housing. Furthermore, data from EdgeProp Singapore’s Landlens tool shows that in the last five years, only 14 new private residential The Myst projects were launched in the Cairnhill subzone alone. Some of the recent launches include 3 Cuscaden, Cairnhill 16, 19 Nassim, Park Nova and Klimt Cairnhill, with 83% of the units already sold.

Nevertheless, buoyant land sales and a robust new launch market in the city-fringe and suburban areas have gradually narrowed the 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). In 1st quarter of 2018, 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 1st quarter of 2023, the price gap between 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.

The Orchard Road shopping belt is lauded for its prime location, close proximity to amenities and excellent transport connectivity – attributes that have made it popular with expatriates. Prime residential neighbourhoods such as Cairnhill, Newton, and the River Valley district have only added to its appeal. EdgeProp Singapore’s Market Trends tool shows that as the pandemic-related measures were gradually eased and domestic-led recovery surged, retail rents in the 4th quarter of 2022 rose to $9.81 psf pm, although still below pre-pandemic levels. Nevertheless, with plans to enhance the vibrancy of the shopping belt, and a few high-profile collective sales transactions, the Orchard Road area is poised for an even brighter future.