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Harnessing big data in retail real estate

Such data - when collected, analysed and interpreted - can empower landlords and retailers to understand their customers better and thus adjust their strategies accordingly.

IN today's world where digital and mobile technologies are ubiquitous, many of us are used to the convenience that our digital devices, in particular mobile phones, bring us. While these digital devices supply us with information on demand, it is no secret that they are also gathering a host of data about us, our movements and our habits, such as through the applications we use or the telecommunication service providers.

Such data - when collected, analysed and interpreted - can empower landlords and retailers to understand their patrons and customers on a deeper level and adjust their strategies accordingly in a meaningful way. Anecdotally, it has been observed that there is an increasing use of big data by landlords and retailers in Singapore over the past two years.

While the common practice is for landlords and retailers to leverage data collected internally - through providing WiFi services via registration, promoting loyalty programmes, or installing movement trackers to track pedestrian flow within the mall, the use of third-party services or tools to collect a broader set of data to benchmark performance against competitors is also on the rise.

Through the two-pronged approach, landlords and retailers are able to have a more holistic picture of their performance in the currently competitive retail market.

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This report explores some types of data analytics that third-party service providers can furnish to landlords and retailers, through a case study on the malls' performance in two regional centres.

Setting the stage: Jurong East and Tampines

Envisaged to become the largest commercial and regional centre outside the city centre, Jurong East already has several malls including Big Box, IMM, JEM, JCube and Westgate - totalling some 1.95 million square feet of retail space. Comparatively, Tampines has three known malls at the heart of the regional centre - Century Square, Tampines Mall and Tampines One, which contribute to about 0.8 million sq ft of retail space.

Whether Jurong East or Tampines, it was clear that for these malls to survive and thrive, they have to cater to the wider respective western and eastern region and beyond, as the quantum of retail space would not be sustainable if they depend on the immediate residential catchment alone.

Magnets of the East and West: Where are the people coming from?

Leveraging Calibrate, a retail analytics tool that uses the global positioning system in mobile phones, the footfall to the malls over a 12-month period from 1 July 2018 to 30 June 2019 was studied.

Interestingly, the analytics revealed that only 12 per cent of the five Jurong East malls' visitors were residents living in the immediate catchment areas of Jurong East. A larger 52 per cent of the total visitors were residents from the wider western region, including areas such as Bukit Batok, Bukit Panjang, Choa Chu Kang, Clementi and Jurong West.

Another 14 per cent of their visitors are residents from the fringe areas such as Bukit Merah, Bukit Timah and Queenstown, and 9 per cent from the North region, in particular Woodlands and Yishun.

Over in Tampines, 39 per cent of the visitors to Century Square, Tampines Mall, and Tampines One come from the immediate catchment. Another 31 per cent of visitors come from the wider eastern region catchment such as Bedok, Changi and Pasir Ris. Twelve per cent of visitors also come from the North-East region, from areas such as Punggol, Sengkang, and Hougang.

Connectivity, critical mass and clustering matter

What does all this data mean?

Using similar methodology leveraging mobile phone data, it has been observed that suburban malls typically tend to see a significantly smaller catchment area, and 60-70 per cent of their catchment is observed to be driven by the immediate area. This is in contrast to the catchment performance of the malls in both Jurong East and Tampines regional centres, where the major proportion of the catchment comes from the wider region. Several reasons contribute to the allure of the malls in the regional centres.

Firstly, the superior connectivity - located at a major MRT station and bus interchange - has certainly enhanced the catchment area of malls located at the regional centres. For instance, further analysis of the visitors to Jem and Westgate found that 50 per cent of them live within 38 minutes by public transport.

Secondly, the clustering of malls, undoubtedly, is a strong pull factor, providing a greater variety of trade and tenant mix. In addition to the regular trades and services available at a suburban mall, they also cater to other shopping, entertainment, and leisure activities for patrons of all ages. Also, each of these malls command a critical mass of above 250,000 square feet.

Collectively, the malls become top of mind among shoppers as a one-stop destination - which could also be the reason visitors patronise relatively frequently. For instance, 29 per cent of visitors to the malls in Jurong East were found to patronise Jem and Westgate, two of the newer malls in the area, an average of 1 to 4 times a month. They also spent an average of 99 minutes in each mall per visit.

On a per square foot basis, the major malls in Jurong East drew about 5 per cent more footfall, compared to those in Tampines. Despite the stronger footfall performance, the average prime rents in Jurong East range from S$25 to $30 per square foot, a discount to the average prime rents in Tampines at between S$27 and S$34 per square foot. Given the breadth of exposure and frequency of visits offered by the Jurong East malls, they appear to present a strong value proposition to retailers, depending on their business strategy, product nature and existing store network, among other considerations.

Big data spells opportunity for landlords and retailers

This case study is just a glimpse into what retail data analytics tools can do and how they can help both landlords and retailers generate powerful and meaningful data.

It offers one avenue for landlords to better understand where their key catchments come from, without the need for any hardware or equipment investment. Other methods such as surveys can be costly if a large sample size is used, while not all malls currently have a membership programme which would allow them to conduct such analysis.

Perhaps what is more useful and valuable is that such analytics tools also allow landlords to understand their competitors' catchments and identify areas of relative strengths or weaknesses. Depending on requirements, month-on-month or day, down to hour-by-hour statistics can also be obtained.

Retailers can also leverage such technologies and analytics to understand the reach of their store network. Some may use mobile phone data to study their physical store network's reach, and compare it against their membership or online customer databases. This could provide insights into catchment areas they may not have considered before and may then consider introducing a store presence. Alternatively, they may find catchment groups with whom they need to strengthen and promote their online presence.

Looking ahead, big data analytics is expected to play a major and more active role in shaping the retail industry. Are you ready to embrace big data yet?

  • Letty Lee is the executive director (retail) and Debbie Lam associate director (consulting) at CBRE