Mall landlords and tenants reimagine space use

/ EdgeProp |

January 3, 2019 8:30 AM SGT

With e-commerce changing consumer behaviour, even retailers and mall owners on Orchard Road are looking at ways to convert footfall into sales. There has been a restructuring of offerings in shopping malls, with an increased focus on activity-based and F&B tenants, observes June Chua, Cushman & Wakefield (C&W) head of leasing, commercial/industrial.

Current trends in the retail scene include pop-ups, multi-label concepts and the introduction of co-working spaces, continues Chua, “all of which strive to keep the mall experience fresh for shoppers”. Landlords and retailers are expected to invest more in technology to “seamlessly integrate the online and offline experience” for consumers, she adds.

Prime Orchard Road malls tracked by C&W saw retail rents edge up 0.9% in the first nine months of this year, while rents of suburban malls climbed 2.9% over the same period. “The indication is that well-managed malls with superior locations have already come out of the woods and are able to attract the bulk of footfall and command higher rents and enjoy full or near-full occupancy,” says Chua.

A view of prime Orchard Road — Singapore’s most famous shopping strip (Picture: Samuel Isaac Chua/The Edge Singapore)

Today, prime monthly retail rents in the Central Region range from $30 to $50 psf, while rents in the suburban areas are $25 to $32 psf, says Lee Nai Jia, Knight Frank senior director and head of research.

However, overall retail rents in the Central Region are expected to decline further, ending the year with a 2% to 3% fall. “We believe retail rents will bottom out in 2019,” C&W’s Chua says. “Sentiment on the economy and job market is still [optimistic] and could have a positive spillover effect on consumer confidence and spending.”

New supply of 1.7 million sq ft

Next year, about 1.7 million sq ft of retail space is expected to come on stream, says Knight Frank. This is 60% more than the one million that entered the market in 2018. The bulk of the new retail space in 2019 is from Jewel Changi Airport (close to 579,103 sq ft), which is said to be 90% leased ahead of its opening. Funan will add about 324,000 sq ft of retail space, while PLQ Mall at Paya Lebar Quarter will contribute 340,000 sq ft.

The upcoming Jewel at Changi Airport will add 579,100 sq ft of retail space next year (Picture: Jewel Changi Airport Devt)

“PLQ continues good momentum into its opening into the year ahead. PLQ Mall is enjoying strong take-up this year, testament to the sustained market appetite in Singapore for quality integrated business and lifestyle precincts,” says Richard Paine, managing director of Paya Lebar Quarter by Lendlease. The mall will feature over 200 shops with shopping and entertainment experiences when the development launches in phases across 2019. It will comprise popular household brands and new-to-market concepts in retail and F&B.

The new retail spaces next year are not expected to compete “headon” with Orchard Road malls, says C&W’s Chua. However, the opening of Terminal 4 at Changi Airport would mean more visitor arrivals to Singapore, and increased tourism spending, thereby, benefiting Orchard Road malls, she adds. C&W forecasts that prime Orchard Road retail rents could rise 1.5% in 2019. In prime suburban malls, C&W expects a 2% increase in rents next year on the back of improved consumer sentiment.

The retail component of Paya Lebar Quarter will comprise 340,000 sq ft of retail space (Picture: Lendlease)

Given their locations, the upcoming malls in 2019 are also unlikely to compete directly with each other. “Malls are very location-specific, and are generally clustered around transport nodes,” says Alan Cheong, senior director and head of research for Savills Singapore. “The catchment area is usually a 3km to 5km radius.”

Curating tenant mix

In the past, mall owners focused on improving the hardware — the façade and interior spaces of the buildings — via asset enhancement initiatives. Recent AEI works on some older malls have, however, yielded diminishing returns, says Cheong. “Mall owners are now wary about spending more on AEI.” These days, mall landlords are increasingly paying attention to curating the right tenant mix to pull in the crowds, says Wendy Low, executive director and head of retail at Knight Frank Singapore.

These include a range of entertainment, amusement as well as fitness and wellness centres. Malls that provide “athleisure or amusement offerings” continue to attract the community — whether family members or friends — to bond and be entertained, says Low.

Malls that have been successful in doing this include VivoCity with its Timezone flagship store, and the newly opened Superpark at Suntec City. “The experiential trend will be an increasingly crucial aspect for mall landlords to consider and follow, as they seek ways to stand out from the rest,” she notes.

More retailers are investing in technology and adopting cashless payment systems such as QR codes to simplify and speed up the shopper experience, continues Low. Retailers are looking at ways to reimagine their service offerings with more “one-stop-shop experiences”. More collaboration is also expected among different trades, she adds.

Co-working in malls

Co-working has also provided a new lease of life for malls, especially on the upper floors, which typically suffer from lower footfall. One example is JustCo, which took up an entire floor plate of 60,000 sq ft on the third level of Marina Square. The co-working space has a mix of office suites and hot desks that cater for over 1,000 members.

JustCo at Marina Square occupies 60,000 sq ft on the third level and caters for more than 1,000 members at the co-working space (Picture: Samuel Isaac Chua/The Edge Singapore)

In June last year, Hong Kongbased co-working operator The Work Project opened its flagship space of 21,000 sq ft on the fourth level of OUE Downtown Gallery.

The entry of co-working operators to fill up malls reflects “the dire situation” in shopping centres, says Savills’ Cheong. However, it also shows that bigger co-working space operators are now willing to pay higher rents to secure space within malls, he adds.

Next year is the year that “experiential retail will be tested”, says Savills’ Cheong. “Experiential retail will be a good line of defence for mall owners against the onslaught of e-commerce. If [experiential retail] fails to draw in higher footfall, there would be no choice but [for landlords] to substantially lower rents.”

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