Too many malls in Singapore?

With over a hundred malls currently operating in the city-state and several more expected to rise in the near term, is Singapore over-malled?

By Nikki De Guzman

According to the latest data from the government, Singapore currently has over one hundred shopping malls spread across the island. Just along Orchard Roadthe countrys world-famous shopping beltare at least 40 retail malls, with many standing side-by-side along the 2.2 kilometre shopping boulevard.

For a country known as one of the hottest shopping destinations in Asia, the number of malls currently operating in the Republic might be an indicator of how the retail property market has performed over the years. However, as always, there is a flip side to everything, a common observation among locals and tourists alike is that there are a lot, if not too many malls in Singapore already.

In fact, RHB Research reported in September 2015 that the Republic has 1.08 sqm of retail space per capita. Thats one mall for every 53,000 people.

It also stated that the city-state has the highest level of retail space per capita among ASEAN countries significantly above Bangkok which has 0.8 sqm per capita, and nearby Kuala Lumpur with 0.71 sqm per capita.

But what does this mean for the local retail market? What are the implications to mall operators, tenants and consumers?

Here, there, everywhere

While almost half of the countrys retail supply can be found in the downtown Orchard area, a number of malls have also started sprouting up outside the shopping enclave in recent years.

As reported previously in Issue 91 of PropertyGuru News & Views, mall decentralisation in Singapore has started to pick up, and the market is seeing more retail malls dominating some areas.

Jurong East, for example, has changed dramatically in recent times. Just in the last five years, Jurong East saw the opening of four shopping mallsJCube (2012), Jem (2013), Westgate (2013) and BIGBOX (2014)that feature specifications that are typically only seen in those located in Orchard Road.

It can be observed that these malls are situated quite close to, if not side-by-side each other, and just like those in Orchard, allow seamless connectivity to other malls around the area. Specifically, JCube, near Jurong East MRT station, is connected to it via a pedestrian crossing. Just across the station is the 7-storey mall Westgate, which provides a covered linkJ-Walkto Lend Leases mixed-use development, Jem.

From Jem, consumers can access Singapores warehouse shopping mall, BIGBOX, via a link bridge. Also in Jurong is the outlet mall IMM Building, which provides patrons shuttle services to and from Westgate and JCube, and via a link bridge to the train station.

It is noted that these mallsJCube, Westgate and IMM Buildingare owned and operated by CapitaLand Malls.

Responding to an enquiry by PropertyGuru, CapitaLand discussed how they tackle the challenges of remaining relevant to consumers and how they keep their malls competitive among other malls.

We position our malls differently to cater to different shopper segments, even though they may be located near one another, shared Teresa Teow, Head of Retail Management for Singapore at CapitaLand Mall Asia.

To illustrate, the three CapitaLand malls in Jurong Gateway are positioned differently to complement one another. Westgate is the premier lifestyle and family mall, offering the best of downtown shopping with brands that in the past were found only in malls along Orchard Road.

JCube is the leisure and entertainment hub IMM Building nearby is Singapores largest outlet mall which has 85 outlet stores, Teow said, adding that these three malls offer the equivalent of a three-in-one mega mall forming a retail destination where there is something to offer every shopper.

Experts said having many malls in one location is not entirely a bad thing. The more diversity, the more vibrant the shopping scene, said Sulian Tan-Wijaya, executive director of retail and lifestyle at Savills Singapore.

The upside (of having many malls) is the ability to create a critical mass and large enough cluster of shopping and lifestyle experiences for a shopping destination. This is how Orchard Road helped position Singapore as a shopping capital, where global retail giants coexist with independent, eclectic small retailers to complete the shopping experience, she added.

However, the property consultancy also warned of the downside with an oversupply of malls. (There is) a dilution of tenant mix, and duplication of brands. Landlords compete for the same tenants and too many retailers compete for the same pool of shoppers, she said.

Too many, too similar

And because a lot of the malls here target the same consumers, it has resulted in a market with too many malls that are too similar.

Last year, a number of retail groups, particularly those in the fashion line, announced shop closures and consolidations. One of them is Al-Futtaim Group which manages Robinsons, John Little and Marks & Spencer in Singapore.

The group announced the closure of some of Singapores best-loved department stores last March, saying its the groups ongoing business strategy to ensure the long-term sustainability of our businesses.

There is not enough differentiation in the store, said the groups head of business in Asia, Kesri Kapur, as quoted in TODAY. For such a small market, if its to be viable in the longer-term and sustainable, there has to be some differentiation (among) the stores.

Among the over 100 malls in Singapore, many overlap in terms of tenant mix and offer the same brands, services and entertainment to consumers. However, there are still a number of shopping malls that stand out when it comes to their tenant mix and concept. These include Funan DigitaLife Mall at North Bridge Road, which mainly houses shops selling computers and other electronic merchandise, and Velocity in Novena, which offers an extensive range of active-lifestyle stores.

All ahead

With the current economic conditions here and overseas resulting in slower retail sales from both locals and tourists, coupled with other existing challenges such as the manpower crunch and rising business costs, analysts say that for malls to survive these challenges here, the key is to ensure competitiveness.

Landlords will find it harder to attract tenants to their mall and will be competing amongst themselves for the same tenants. An over-supply can also lead to downward pressure on rents without increase in demand from new retailers, Savills said. If they are willing to lower their rents to attract the right concept for the mall, they will eventually regain their higher rents when the market recovers.

Savills added that mall operators should be quick in spotting new trends, customer preferences and consumption behaviours.

The slowdown in retail sales, competition from online retail and over-supply of malls in some areas are all negative near-term factors for malls in these locations, said Tan-Wijaya, adding that only if these malls are responsive and receptive enough to changes emerging in the retail landscape will they be able to strengthen their competitive position in the long term and enjoy the fruits of their efforts during the difficult times.

CapitaLand Malls agrees with this sentiment and looks to ensure that its malls meet the needs and aspirations of consumers. To this end, we continually reinvent our malls to ensure that they stay relevant and attractive to shoppers. This includes asset enhancement initiatives to optimize the retail offerings and refreshing the tenancy mix, as well as carrying out attractive promotions to draw shoppers to our malls.

Looking ahead, Savills believes that the current number of well-managed retail malls here will remain proactive in managing their tenant mix, and expects these malls to replace weaker tenants with newer concepts or better-performing retail brands.

And while there could be some businesses that are casualties of the growing number of retail malls here, analysts believe that the clear winner in this scenario is the consumers as they will continue to be spoilt for choice for retail options.

Meanwhile, Knight Franks Q3 2015 report estimates that 4.2 million sq ft of retail space of net lettable retail space will come on-stream in Singapore until 2019 (Table). However, JLL said the retail supply in the republic, not including Jewel @ Changi Airport, would be at a 10-year low from 2016 to 2018. This comes after the government disapproved the initiation of new retail space since 2013, the property consultancy said in its 2016 market outlook.

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