Singapore’s iconic Orchard Road is witnessing a resurgence in investment interest, driven by significant developments such as the ION Orchard deal and a privatisation offer for Paragon. These moves are attracting attention to the area’s trophy malls, according to a recent report by DBS Vickers Securities.
The report highlights that Orchard Road’s passing rents are still approximately 4% below pre-pandemic levels. However, this gap is expected to close rapidly due to the reversal of the Singapore Dollar’s strength and retailers’ price harmonisation, which are anticipated to boost both local and tourist luxury spending.
Retail-focused Real Estate Investment Trusts (REITs) are currently trading below book value, undervaluing quality central malls at less than SGD3,000 per square foot or with implied yields of 5% to 10%. This presents a potential opportunity for investors looking to capitalise on undervalued assets.
Among the REITs, CapitaLand Integrated Commercial Trust (CICT) is noted for its superior asset yields. Meanwhile, Lendlease Global Commercial REIT (LREIT), trading at 0.66 times its price-to-book ratio, is identified as a potential candidate for privatisation.
These developments suggest a promising outlook for Orchard Road’s retail landscape, with potential implications for increased investment and growth in the sector. As the area continues to attract interest, stakeholders are keenly observing the evolving dynamics and opportunities within Singapore’s retail market.
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