FIRST
Properties in the CapitaMall Trust portfolio (including Funan) have maintained a 98% occupancy rate through 2020.
Shoppers make a surprising comeback to Singapore malls
T
he circuit-breaker lockdown has shown up a few interesting things about the psyche of the average Singaporean shopper, as evidenced by the results from CapitaMall Trust (CMT), the largest operator of malls in the country. Sure, everyone has been staying in and ordering food online, but when it comes to actual shopping we now know that everyone has been most busy either decorating their home, or buying some new active wear to enjoy those brief moments of solitary recreation. These (Home Furnishings and Sporting Goods) were the two broad categories that saw the biggest rises in consumer activity after the circuitbreaker restrictions were lifted. Singaporean shoppers also appear to have been avoiding “window shopping”, also known as the art of aimlessly wandering around malls. Foot traffic to malls dropped down 40% year-on-year in Q3. But what’s interesting is those that went to malls were actually purchasing much more, as evidenced by sales declining far less than the number of visitors at just 11%. Which is likely to be 8
SINGAPORE BUSINESS REVIEW | DECEMBER 2020
good news for the mall operator over the long term, since it had given large rent cuts to tenants, and also agreements to take a smaller percentage of sales just to keep them in the malls. For example, in the same quarter that tenants’ sales declined by just 11%, CMT’s gross revenue dipped 25.3%, according to OCBC Research. This was driven largely by rental waivers of S$29.5m granted to tenants, coupled with lower gross turnover rental.
The same thing can be seen through retail sales data, which shows A stark preference for brick and mortar shopping (away from e-commerce) since the circuit breaker restrictions have been lifted. “Online sales as a proportion of total retail sales (in August) was almost unchanged from the previous month at 10.9%, which is significantly lower than the 24.4% seen during the circuit breaker month of May,” OCBC Research has advised, adding that this reflects the continued importance of brick and mortar retail, especially in suburban locations of Singapore. But that is not to say e-commerce has no upward room to move in Singapore. OCBC Research has urged retailers to maintain multiple sales channels for the new normal business environment. “The structural shift towards stronger e-commerce penetration rates as compared to pre-Covid-19 times (average of 5.5% from 2018-19) is here to stay and retailers and landlords will have to continue their omni-channel strategies to stay relevant.” Some mall tenants have also expressed interest to expand, although this would likely happen only in late 2021 or 2022. “We expect rental waivers to moderate ahead, as these would be granted on a more targeted basis,” OCBC Research has advised. This all shows that Singapore’s retail scene has made a strong comeback. In fact the mall operator went into the circuit breaker offering more flexible lease structures such as accepting a lower first-year base rents with step-ups in subsequent years. As a result, they now have 98% occupancy, and would be the envy of any hotelier in this environment.
CapitaMall Trust: Portfolio Occupancy Trend
“Lorem ipsum dolor sit amet, consectetuer adipiscing elit, sed diam nonummy nibh euismod tincidunt ut Source: REIT Manager; OCBC Research laoreet dolore magna aliquam.”
