Investor confidence in S-REITs grows as Orchard Road malls hit record prices: DBS

SINGAPORE: Investor confidence in Singapore’s prime retail assets has grown as a record-breaking deal highlighted the limited supply and lasting value of Orchard Road malls, according to a DBS report.

A 50 per cent stake in ION Orchard sold for S$1.85 billion, setting a new high at S$5,928 per square foot (psf) with a 4.9 per cent yield, the highest price for a prime retail mall. Soon after, a privatisation bid for Paragon REIT valued Paragon at S$4,500 psf with a 5.2 per cent yield, Singapore Business Review reported.

According to The Business Times, DBS said potential buyers are keeping an eye on Orchard Road malls, awaiting a “clear turn” in prime retail rents.

Analysts Geraldine Wong and Derek Tan noted that rents are still about 4 per cent below pre-pandemic levels but could recover soon, as central landlords continue to see strong demand for lease renewals amid limited retail space, anchored luxury tenants, and rising foot traffic and luxury spending.

“The resurgence of luxury spending is key to sustaining growth in the S-REITs we cover that have around 40 per cent or more exposure to luxury Orchard Road malls,” they added, calling luxury brands the “heartbeat” of these malls.

Luxury malls like Paragon make over 40 per cent of their rental income from high-end tenants.

Analysts said investor interest in Orchard Road malls is rising, with many taking a long-term view, expecting tourist numbers to recover fully and local spending to improve.

While consumer sentiment is still recovering, analysts said price harmonisation by international luxury retailers, a weaker Singapore dollar, and growing regional confidence could boost Orchard Road’s status as a luxury shopping street in Asia. /TISG

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