Singapore

The Big Read: After decades at the top, Orchard Road faces a time of reckoning

Orchard Central shopping mall on a Wednesday at 4pm. Several malls along Orchard Road are quiet, with few shoppers in sight. Photo: Raj Nadarajan/TODAY
Shuttered units at the basement of Far East Plaza on a weekday evening. Photo: Raj Nadarajan/TODAY
Published: 12:05 AM, May 21, 2016
Updated: 6:00 AM, June 4, 2016

SINGAPORE — Once a famed shopping haven for Singaporeans and tourists alike, Orchard Road is at risk of going out of fashion, never mind the opulence and grandeur of new and refurbished malls lining the 2.2km boulevard.

Even on weekends, the crowds have visibly thinned and vacancy rates have risen — at some of the older malls, more than half the shops on entire floors are empty.

Faced with the combined onslaught of online shopping and the mushrooming of suburban malls in housing estates, it is little wonder that Orchard Road is feeling the heat. But crucially, say shoppers, retailers and experts, it has failed to adapt to changing consumer trends and respond to competition.

For a place marketed for decades as a tourist hotspot, shopping centres there have no baggage storage facilities, they point out for example. Neither is there an airport express bus service.

Singaporeans are also increasingly finding fewer reasons to make their way to Orchard Road. Apart from being able to get everything they need online or from the nearest suburban mall — if they fancy a spot of traditional shopping, it is a hassle finding parking at Orchard Road for those who drive and the malls there are, by and large, not family-friendly.

Youths also say that there are “cooler” places for them to hang out — such as Bugis, where the retail mix is targeted at them.

Ms Sophia Chan, who is in her 30s, finally managed to persuade her husband to go shopping with her and their two toddlers at Orchard Road one recent weekend. But that trip has made the family — who live in Punggol — swear off the place for good. “We will stay out of Orchard Road unless it is a very specific agenda we have in mind. It is unnecessary stress, and with kids, it is a no-no,” said Ms Chan, whose sons are aged four and two. “We would rather have a good family time elsewhere. For things we need to buy, most of them are available at the nearby malls. If not, it is best to go online.”

To get her dose of retail therapy, Ms Chan said she frequents Waterway Point and Vivocity, where her kids can spend time at the children’s play areas. Parking at these places is cheaper, too, she pointed out.

Mr Ian Lee, 38, lamented that, over the years, Orchard Road has lost its connection with Singaporeans by going more upmarket. Noting that prices at the shopping belt are generally higher, Mr Lee, who was in the vicinity for work last week, said: “We don’t come here much as it is no more a place for (the masses).”

Even for tourists or foreigners, the appeal of shopping at Orchard Road is diminishing, no thanks in part to the strong Singapore dollar. Australian Marc Adams, who is in his late 40s, said: “I am not very fond of shopping, but my wife tells me that some brands are more expensive here. We don’t necessarily need to shop here as we travel a lot.”

Nevertheless, Mr Sun Xinchun, a China-born student who is studying in a polytechnic here, said he had to take his parents to Orchard Road when they came to Singapore to visit him recently. “Orchard Road is famous in China,” he said. However, he noted that there was not much difference in terms of the variety of brands and the prices in Orchard Road compared with what his parents could buy back home. For him, he prefers to spend time with friends in Bugis, where it is “more affordable to eat, and shop for our kind of stuff”.

In a TODAY straw poll of 100 people aged 18 and above in the Central Business District, 17 respondents said they go to Orchard Road at least once a week. In comparison, 64 said they go to suburban malls at least once a week, while 19 shop online once a week or more. Among other findings, almost half of the respondents said they go to the shopping belt only about once every three months, or hardly ever.

VACANCY RATE AT A FIVE-YEAR HIGH

Brick-and-mortar retailers across the island have been buffeted by the economic slowdown, competition from e-commerce, the manpower crunch, rising business costs and lacklustre tourist spending, among other things. But those at Orchard Road appear to be harder hit: Data from the Urban Redevelopment Authority showed that the vacancy rate in malls along Orchard Road hit a five-year high in the first quarter at 8.8 per cent. This is higher than the average vacancy rate in malls islandwide (7.7 per cent).

Ms Christine Li, director of research at Cushman & Wakefield in Singapore, said the vacancy rate in Orchard Road will continue to climb, probably hitting 10 per cent by the fourth quarter.

A walk around Orchard Road tells the story: Several malls are quiet with few shoppers in sight. At the older strata-titled malls such as Far East Plaza, the shutters are down for many units on its ground floor.

Newer shopping centres are not spared either, with vacant shops at Mandarin Gallery and 268 Orchard, to name just two.

Several malls told TODAY that they are focused on creating niche shopping and dining experiences. A Hong Leong Group spokesman cited Claymore Connect, which is located next to Orchard Hotel and positioned as a “family-oriented mall ... to cater to the growing captive residential population in the nearby precincts”. Palais Renaissance, which is owned and managed by Hong Leong Group subsidiary City Developments, also offers an “intimate retail experience to a niche clientele with sophisticated and discerning tastes”, the spokesman said.

Frasers Centrepoint Malls, which manages The Centrepoint, said it is currently looking for family-friendly tenants. Its spokesperson said: “We are taking the necessary time to assess tenants’ suitability. While many retailers are likely to remain cautious and take stock of their business operations over the next 12 months, we want to stay on top of the game and renew the experiences that we provide.”

Individual shopowners said their businesses have seen better days. “We are losing money hand over fist, and not sure what we could do next,” said the manager of a garment store in Orchard Gateway who gave his name only as Mr Lim.

Mr Prem Khaitani, who owns Christian Armani Ladies & Gents Tailors at Far East Plaza, said: “It has never been so bad … (In the past), retailers made a bee-line to get a shop here. Today, many are winding up … units are increasingly falling vacant. I am struggling to keep the shop open.”

He added: “My two employees have nothing to do all day. However, I am not in a position to terminate their jobs as their families will then be in deep trouble. They have been with me for the past 15 to 20 years.”

As a sign of lean times, he pointed out that the rental for his 330 sqft unit had fallen from S$20,000 a month in the 1980s — Far East Plaza’s halcyon days, when Metro was its anchor tenant — to S$7,500 currently.

Mr Paul Lim, who works at Aik Seng Photo at Lucky Plaza, said: “We used to sell four to five cameras a day; now, we are unable to sell even one in a week ... Tourists find it expensive to shop in Singapore as our dollar remains strong.”

In contrast with the falling businesses of some malls along Orchard Road, suburban shopping centres are gaining popularity, buoyed by factors such as proximity to population catchments and easy accessibility via public transport.

Increasingly, upscale brands have been uprooting themselves from prime shopping districts and moving closer to their customers in the suburban markets, said Savills Singapore research head Alan Cheong.

In December, for instance, luxury watch retailer The Hour Glass opened its first outlet at Parkway Parade in Marine Parade — the first suburban store to carry Rolex watches. In the same month, luxury brand Chanel opened its beauty and fragrance store at Jem in Jurong East.

Brands such as H&M, Uniqlo, Onitsuka Tiger, British India, and Juicy Couture have also set up shop in malls in housing estates.

WHOLESALE CHANGES NEEDED

The busiest shopping streets around the world, such as Oxford Street in London or Fifth Avenue in New York, are not just about shops. They are also a “work-and-play” district where people enjoy hanging out, apart from eating and shopping.

As such, turning Orchard Road into a lifestyle district — where both locals and tourists will aspire to go to for shopping and other activities — could, perhaps, be a game changer, said Ms Anthea To, senior associate director, research & advisory, at Colliers International.

“With Orchard Road’s cultural heritage, appealing residential areas as well as offices, more can surely be done on Orchard Road to make it even livelier. Having more public spaces, weekend farmers’ markets, hip cafes and bars, as well as thematic kiosks on the side streets — if regulation relaxes — would boost Orchard Road’s vibrancy,” she added.

Also, issues such as traffic and connectivity will need to be looked at as shops alone are not enough to maintain or boost footfalls. Currently, the multi-lane busy traffic makes the street unwelcoming and intimidating for pedestrians at street level.

Turning some parts of Orchard Road into pedestrians-only areas could be a way forward to better connect both sides of the shopping belt, Ms To said.

Mr Desmond Sim, head of CBRE Research in Singapore and South-east Asia, suggested making public transport free along Orchard Road, as it is in Melbourne’s city centre.

“It is hard to expect shoppers to cover the entire shopping area at Orchard Road by foot. More so, given frequent rains and torrid weather in Singapore. Moreover, shoppers tend to be lazy, and seek experience and enjoyment while shopping,” Mr Sim said.

He noted that pushing more for underground linkages may result in too heavy a financial commitment for landlords in the area to shoulder amid tough times.

However, an airport express from the Orchard Road area to Changi Airport, along with a luggage drop-off point in the vicinity, will go a long way towards easing the shopping experience for tourists in Singapore’s premier shopping destination, Mr Sim noted, pointing to the IFC experience in Hong Kong.

The IFC mall, located in the city’s Central District, sits above a transport hub that includes the Airport Express station.

CHALLENGING RETAIL SCENE

In response to various suggestions on how to revitalise Orchard Road, Ms Serene Tan, director of lifestyle precincts development, Singapore Tourism Board (STB), told TODAY: “We appreciate and will take these suggestions into consideration, along with the insights that we have gathered from our Envisioning Orchard Road exercise.”

In March last year, the STB announced that it had embarked on an Envisioning Orchard Road exercise, which was expected to wrap up by the end of the year.

Ms Tan said the STB will be taking the insights from the “fruitful” exercise into consideration in its plan to enhance the shopping belt. More details will be shared when they are ready, she said.

Acknowledging that the retail landscape “is getting increasingly competitive, and consumers are becoming more discerning”, Ms Tan noted that the STB works closely with the Orchard Road Business Association and other stakeholders to “constantly rejuvenate the precinct with new events, concepts and programming”. For instance, Christmas on A Great Street, the annual Christmas Light-Up on Orchard Road, is a perennial favourite among visitors and Singaporeans. The event attracts more than one million tourists and four million locals each year.

Apart from the Christmas light-up, there are also the annual fashion extravaganza Fashion Steps Out Orchard Road, and the F1-themed Rev Up @ Orchard Road — all striving to inject buzz into the precinct, Ms Tan said.

She reiterated that Orchard Road “remains Singapore’s most iconic shopping destination, and continues to be the location of choice for international brands seeking to establish their presence in Singapore and the South-east Asian region”.

She said: “It is already home to many flagship stores of international brands such as Gucci, Crate and Barrel, and Sephora. By the end of this year, there will be even more. For instance, brands such as Uniqlo, Victoria’s Secret and Hermes will be establishing their first South-East Asian flagship stores on Orchard Road. Apple has also announced plans to set up its first brick-and-mortar store in the precinct within the year.”

Several analysts said the upcoming Apple store at Knightsbridge mall along Orchard Road could potentially revive the shopping district. After all, remarkably designed Apple stores in several places around the world are known for their look and feel.

“Apple stores typically have this ability to enliven shoppers’ spirit. People are waiting for it with bated breath. It will likely boost footfalls at Orchard Road,” said Mr Sim.

Based on official annual tourism statistics from 2005 to 2014, Orchard Road is the most-visited free-access attraction in Singapore among visitors, the STB said.

Nevertheless, the STB’s preliminary estimates showed that Singapore’s tourism receipts fell last year for the first time in six years by 6.8 per cent to S$22 billion.

While visitor arrival numbers to Singapore surpassed targets to reach 15.2 million, tourism receipts fell short of the official forecast of between S$23.5 billion and S$24 billion.

The Government has embarked on efforts to reverse the tourism slump, including a S$20 million Golden Jubilee marketing campaign last year. These appear to be bearing fruit, with visitor arrivals to the Republic up in the first two months of this year from a year ago.

Last month, Minister for Trade and Industry (Industry) S Iswaran said that while economic uncertainty means periodic fluctuations for the tourism sector, there is also the “promise of significant long-term opportunities”.

MULTI-MILLION MAKEOVER

Back in October 2007, the STB announced a S$40 million rejuvenation plan to create a more vibrant streetscape and enhance the lifestyle experience on Orchard Road.

The plan included enhanced road and pedestrian mall lighting to create night-time landscapes, new coordinated street furniture beside a lush, green tree-lined boulevard, creative event spaces and a more integrated and engaging pedestrian mall.

Apart from new developments such as ION Orchard, 313@Somerset and Orchard Central, older buildings such as Hotel Phoenix and Specialists’ Shopping Centre were also slated for redevelopment.

However, Cushman & Wakefield said in its 2016 Asia Pacific Capital Insights report published last month that the rejuvenation plan “turned out to be a bit of an overkill”.

The report noted that when the global financial crisis hit in 2008, consumers tightened their belts, and retailers were badly hit. At the same time, prime retail supply hit a record high with the completion of ION Orchard, 313@Somerset and Orchard Central in 2009.

Orchard prime rents contracted from S$45.40 per square foot per month (psf/mo) at the end of 2008 to S$36.50psf/mo in the two years through 2010, correcting by almost 20 per cent.

According to Cushman & Wakefield research director Li, rents have since stablised. However, they still remained 18 per cent below the peak in the first quarter of 2016.

While Orchard Road is trying to recapture its heyday, suburban malls have enjoyed the benefits of decentralisation and urban renewal in recent years. Rents and occupancies in these malls have continued to outperform that of Orchard Road’s since the financial crisis, said Ms Li.

Orchard Road can expect continued competition for the shopping dollars from other parts of Singapore, with about 2.2 million sqft of retail spaces entering the suburban market over the next five years.

According to Cushman & Wakefield, almost 30 per cent of that new retail space will come from new developments at Changi Airport, in the form of Terminal 4 and Jewel Changi Airport, a retail and lifestyle complex within the airport that is expected to be ready by 2018.

Meanwhile, retail analysts said Orchard Road has to turn itself around by then, or risk losing its status as a Singapore icon to the new jewel in town.

Whatever plans the authorities have up their sleeves to revive the iconic shopping belt, they have to do it quick and get it right — in order to keep its special place in Singaporeans’ hearts, which is fast diminishing. 

Mr Vincent Tan, 52, a taxi driver who lives in Sengkang, said: “It’s a waste of time and loss of energy to drive down to crowded Orchard Road. Gone are the days when outings at Orchard Road sounded like a plan. We now shop online and get stuff delivered home. Our kids enjoy browsing online stores.”

Ms Belinda Goh, a stay-at-home mum from Bedok, added: “Shopping online is much cheaper and less stressful.” ADDITIONAL REPORTING BY REGINA LEE AND ILIYAS JUANDA