SINGAPORE (THE BUSINESS TIMES) - Department store Robinsons closed its last outlet in Singapore early this year after 162 years of operations. It shows how retail operators with physical outlets are struggling amid the relentless rise of online shopping.
But take pause - don't write off all properties exposed to retail sales just yet. Here's why investors should take a closer look at heartland malls.
Suburban malls are often centrally located within HDB townships with good connectivity to MRT lines and bus interchanges. What this translates into is a ready catchment population for the mall.
There are strict planning guidelines in Singapore, so it is not easy for another mall to be built near an incumbent suburban mall and draw shopper traffic away.
With the trend for a higher work-from-home component, suburban malls benefit from residents, who are living nearby, spending more time in the neighbourhood. An office worker who previously patronised food and retail outlets in the Central Business District during lunch hour may now be doing the very same activities at the suburban mall near home.
Essential vs non-essential
Suburban malls tend to have higher exposure to essential services such as food and beverage outlets, supermarkets and pharmacies than central malls. In Frasers Centrepoint Trust's (FCT) case, around 45 per cent of net lettable area is occupied by providers of essential services compared with an estimated 20 per cent to 30 per cent for a central mall.
Could the suburban malls be thriving at the expense of the around-15,000 shops that the HDB has? The HDB is conducting a study to look at the value of HDB heartland shops and see how they can stay viable.
What suburban malls can aspire to is to go beyond being a convenient place to shop and dine to forging bonds with the communities they serve.
Be the first port of call for budding entrepreneurs from the neighbourhood to set up shop by sharing risks with the new entrepreneur. Support active ageing in the community, and partner with schools and social service organisations to carry out activities that benefit the less privileged in the vicinity.
They should also assume leadership in adopting environmental best practices to appeal to the climate conscious.
Tale of two cities
Orchard Road, city centre and destination malls may struggle while suburban malls should thrive. CapitaLand marked down the valuation of Ion Orchard and Jewel Changi Airport by 8 per cent and 17 per cent respectively as at end-2020 compared with a year ago.
Valuation for suburban malls held by CapitaLand Integrated Commercial Trust (CICT) such as Tampines Mall and Junction 8 dipped by around one per cent over the same period. But CICT recorded steeper valuation declines for integrated developments with substantial retail component in the city area of 4 per cent and 6 per cent for Plaza Singapura and Raffles City, respectively.