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Thread: Too many shopping malls?

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    Default Too many shopping malls?

    Published March 22, 2007

    [SIZE="5"][B]Too many shopping malls?[/B][/SIZE]

    [B]Singapore will see some 20 new retail venues by 2010, but the space may well be overdue, say ELAINE CHEW and WILLIAM TEO[/B]


    SHOPPING fanatics may have to hang on tight to their purses as Singapore is poised to see a mushrooming of shopping centres in the next three years or so with some 20 malls, large and small, sprouting throughout the island.

    It kicks off a little slowly this year, with the key new mall being the redeveloped Kallang Leisure Park. But a slew of developments will emerge in 2008 and the momentum will increase once the Singapore Flyer is in operation. Orchard Central and Orchard Turn will also be competing for the festive dollar by Christmas 2008.

    Come 2009, all eyes will be on Marina Bay Shoppes, the retail mall of the Marina Bay Sands integrated resort. Orchard Road will welcome Somerset Central in 2010, the last of the trio of new malls aimed at rejuvenating Singapore's main shopping belt.

    Putting all this into numbers, Singapore will see an additional 4.5 million sq ft of net lettable retail space by 2010, equivalent to four VivoCities. By then, total retail stock on the island could be about 40 million sq ft.

    If you're wondering if there will be enough shoppers to support the large increase in shopping space, it is worthwhile to note the situation in the past decade, which saw two contrasting supply swings.

    From 1996 to 2000, annual new supply averaged 415,000 sq ft. But from 2000 to 2005, interest waned and supply was just 15,000 sq ft a year. This occurred when the economy was still growing at a healthy 4 per cent annually, with relatively high consumer confidence and good tourist arrivals.

    Also, new retail malls in the past decade were mostly built in the eastern and western regions, catering to suburban shoppers. However, future major supply will largely be in the downtown core, Orchard Road and other parts of the central region. These are locations that have been lacking in new retail developments from 2000 to 2005.

    The potential increase in supply is thus overdue, both in terms of quantity and location. Still, the 4.5 million sq ft of new retail space is not an insignificant amount, bumping up supply by 10 per cent. While some may be concerned that Singapore will be over-shopped, the worry may be premature given current and projected trends.

    [B]Growing retail sales[/B]

    After the 1997 Asian crisis, retail sales excluding motor vehicles have been on an uptrend, growing at an annual compounded rate of 4.2 per cent. Even after the 9/11 bombings and Sars, retail sales were surprisingly resilient, dipping by only one per cent and 2 per cent in the respective years.

    Retail sales continued to rise in 2006, which is why we are still seeing ambitious expansions and local and foreign brands hunting for more space.

    Going forward, Singapore's retail scene presents a robust picture. According to the latest MasterIndex of Consumer Confidence survey by MasterCard Worldwide, Singaporeans are the most optimistic in the Asia-Pacific region as the economy strengthens and unemployment falls. This high level of optimism will contribute to the ringing of cash registers.

    [B]Tourist dollars[/B]

    Like most retail sectors in major cosmopolitan cities, Singapore's retail industry relies not just on local demand, but also foreigners. The authorities have been looking at ways to grow tourist spending. In 2006, the tourism sector generated an estimated $12.4 billion in tourism receipts from 9.7 million visitors, both record highs.

    With the two integrated resorts and initiatives by the Singapore Tourism Board, Singapore is on course to achieve its target of doubling tourist arrivals to 17 million and nearly tripling tourism receipts to $30 billion by 2015.

    This will ensure that the bulk of new shopping malls, which are located in the major tourist attractions, will be filled with shoppers.

    [B]Key performance indicators[/B]

    When seven malls sprouted in Simei, Tampines and Pasir Ris during the 1990s, naysayers reckoned that the fierce competition would make them unsustainable. However, the malls have exceeded expectations and are enjoying good traffic flow. Currently, yet another mall is being built at the Tampines Regional Centre, at the former DBS Tampines Centre and the adjacent Pavilion complex site. Thus, having more malls does not necessarily point to an over-shopped situation. Indicators such as retail space per capita and retail sales productivity may give a better picture.

    Retail space per capita is currently about 7.8 sq ft. Including the new malls in the pipeline, Singapore's retail space per capita will grow to 8.2 sq ft in 2010. This is still lower than in the late 1990s. At 8.2 sq ft, the ratio is also considerably lower than major shopping cities across the globe. Hong Kong has retail space per capita of 15 sq ft while New York has close to 25 sq ft.

    Singapore also scores well in retail sales productivity. Our average retail sales per sq ft amounts to S$46 which is higher than Hong Kong's S$34. This implies that retailers in Singapore are able to generate more revenue from the same amount of retail space.

    [B]Strong demand for malls[/B]

    Islandwide occupancy for retail stock has remained relatively stable over the years, fluctuating between 90.8 per cent and 92.4 per cent. This means that new supply that came on stream was matched by demand most of the time. A good example is 2006 when annual supply of retail space hit a 13-year high of 1.2 million sq ft from the opening of VivoCity. Demand for the year rose to a 13-year high of 980,000 sq ft.

    The strong demand signals that retailers are willing to chase prime retail space. This has also been reflected in retail rents. In 2006, rental growth gained traction, rising between 4 per cent and 9 per cent in prime shopping localities. The strong momentum is expected to continue with rentals projected to rise another 5-10 per cent annually in the next few years.

    If a possibility of being over-shopped exists, retailers would not be willing to pay higher rents. Yet we have seen healthy increases in rentals year after year and more entrepreneurs are setting up businesses.

    In Singapore's case, the risk of being over-shopped is outweighed by favourable factors: rosy retail sales, an expected boost in tourist receipts and reasonably healthy retail performance indicators.

    While it is too early to say if the new malls will bring something of New York's Fifth Avenue or Paris' Champs Elysees to Singapore, there is no denying that additional malls will result in a more competitive retail landscape. This will only serve to strengthen Singapore's position as a regional shopping hub.

    At the end of the day, the biggest gainers are likely to be the shoppers.

    Elaine Chew is associate director and William Teo an analyst at Knight Frank



  2. #2
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    Wink Re: Too many shopping malls?

    Feel sad for the SME retailers . Boy will they feel the heat very soon .

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    Default Re: Too many shopping malls?

    Quote Originally Posted by Unregistered
    Feel sad for the SME retailers . Boy will they feel the heat very soon .
    Double whammy for the retailers i.e. rising rental and dilution in traffic are the challenges facing retailers.

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    Default Re: Too many shopping malls?

    Quote Originally Posted by durian
    Double whammy for the retailers i.e. rising rental and dilution in traffic are the challenges facing retailers.
    I personally think that there are too many malls on the island that are underutilized. I mean, some malls (and I won't mention names), one can find a combination of mostly maid shops and 'massage' parlors. And by the way, some of those are supposedly upmarket malls...

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