Retail landlords must reinvent the shopping mall to thrive in new normal
IN recent years, retail landlords have been working to tweak their tenant mix by bringing in more activities and food & beverage (F&B) tenants, but the pandemic has shown that landlords have not been moving nearly swiftly enough to reinvent the shopping mall.
This has been a challenging year for retail as the circuit breaker and social distancing measures took their toll on footfall and spending. Headwinds were exacerbated by the weaker economy as well as border closures, given that tourists are said to account for some 30 per cent of sales at Singapore's iconic Orchard Road shopping belt. Hence, it is the suburban malls that are leading the recovery, thanks in no small part to the prevalence of employees working from home.
According to Knight Frank, retail rents will fall by 10-15 per cent year on year in 2020, although the real estate firm sees a bottoming out by year-end or early 2021 and retail rents easing by a slower drop of 5-10 per cent in 2021 as the pandemic is contained.
On the bright side, the upcoming retail supply is deemed manageable, which will give the retail sector some breathing room as it heads towards recovery in 2021.
Knight Frank projects an overall decrease in retail stock of 635,000 square feet (net) for the year as some 689,000 sq ft (net floor area) of retail space was removed from the market in the first three quarters. In 2021, more than one million sq ft of retail space is slated to come onstream, largely from ancillary retail space in commercial or industrial complexes, and from some ageing retail malls being renovated, it says.
For department store chain Robinsons - one of the high-profile casualties of 2020 - the pandemic was the nail in the coffin, and it is likely that other retailers will follow suit. Familiar fashion brands such as Topshop and Esprit have already announced plans to shutter their physical stores in Singapore, although Wing Tai will continue to sell Topshop online. Some other brands will likely feel the need to consolidate their footprint and close loss-making stores too.
This is not to say that the outlook for retail is bleak. Other brands have expanded, with US footwear chain Foot Locker setting up shop at Orchard Gateway @ Emerald, while French sporting goods brand Decathlon took over from Metro as anchor tenant at The Centrepoint.
Still, the pandemic has undeniably accelerated the adoption of e-commerce, underlining the urgent need for retail malls to adapt to changing consumer behaviour. Eu-romonitor estimates that e-commerce will account for 13 per cent of total retail sales in Singapore by 2023, up from 9 per cent in 2019. Certain categories, such as beauty and personal care, could see a higher proportion of online sales.
As such, landlords need to pivot to cater to emerging trends or segments of the market which have proven more resilient (such as F&B) to be better positioned for the long run.
This could mean looking to less traditional avenues, such as renting out spaces to mini central kitchens or cloud kitchens - a trend which could gain traction in the future, according to DBS Group Research analyst Derek Tan. Intelligence systems will be the way forward, Mr Tan reckons, which could include using data analytics to track shopper habits and adapt product displays, or augmented reality shopping to improve the shopper experience.
E-commerce platforms
At the same time, others are choosing to build their own e-commerce platforms to complement offline sales at their properties. This year, Singapore's biggest mall operator CapitaLand launched a digital mall platform, eCapitaMall, which largely features its own retail tenants; and a food ordering platform, Capita3Eats, to fuel sales. The idea is that retailers on the platforms will be able to leverage on the group's pool of the over one million members of its rewards programme CapitaStar.
Similarly, Frasers Property Retail has launched an e-commerce marketplace dubbed Frasers eStore, recognising that the rising popularity of online shopping is here to stay. It touts convenience and value-added services as an upside for consumers, such as being able to consolidate orders across different tenants in a single delivery.
A revolving line-up of innovative programmes could also go a long way in driving traffic to malls and, by extension, business for its tenants. Jewel at Changi Airport, for instance, has rolled out glamping for the year-end festive season, while thrill-seekers can try their hand at go-karting at Terminal 4, where operations have been termporarily suspended due to the slump in travel.
Knight Frank's head of retail Ethan Hsu reckons that both landlords and retailers must adopt a new mindset and strive to create sensory experiences which cannot be replicated online. While incentivising retailers with creative concepts may impact financials in the near term, landlords who act quickly to successfully transform the way they operate will do better at landing the right tenants that can attract more footfall, Mr Hsu points out. This ensures growth and long-term sustainability.
As the pandemic leaves a lasting imprint on the retail industry, landlords will need a new playbook to thrive; those that fail to adapt will get left behind.
