CapitaLand beats retail blues by working hand in glove with tenants

Singapore

CAPITALAND Group, a major retail landlord in Singapore, has been weathering the tough retail environment by working more closely with its tenants.

In a recent interview with The Business Times, Jason Leow, president of Singapore and international at CapitaLand Group, said: "Retail for us is about being differentiated from the rest. We look at a few indicators to see if the retailers are doing well. Our shopper traffic number has been creeping up, which means people are still going to the shopping malls. Second, we look at whether the retailers are actually generating sales.

"The rental is a consequence of the retailers' trading numbers. If they trade well, if there are visitors, then rentals will come through."

The group, including its sponsored Reit CapitaLand Mall Trust (CMT), accounts for about 20 per cent market share of major shopping mall space in Singapore. A major shopping mall is defined as one with a net lettable area of at least 100,000 sq ft.

The malls held through CMT include Plaza Singapura, Bugis Junction, Tampines Mall and IMM Building. CapitaLand itself also holds 50 per cent each of ION Orchard and Liang Court mall, 49 per cent of Jewel Changi Airport and 100 per cent of The Star Vista, which is a stone's throw from Buona Vista MRT interchange station.

As at June 30 this year, the group has stakes in 19 operating malls on the island; in addition, it manages SingPost Centre mall next to Paya Lebar MRT interchange station.

CapitaLand is also co-developing a mixed-use project in Sengkang Central that will have a mall.

On a same-mall basis, net property income from the group's Singapore malls grew by 2.5 per cent year-on-year to S$470 million in first-half 2019. Over the same period, shopper traffic at the malls rose 1.9 per cent and tenant sales (in terms of S$ per square foot of retail space) increased 2.4 per cent.

This is generally seen as outperforming the overall lacklustre Singapore retail market.

Mr Leow credits this to a few strategies. One is more targeted marketing activity including the CapitaStar loyalty programme, which has one million members in Singapore.

Another is refurbishing and repositioning the malls to stay relevant.

While tenant retention is high, the group wants its tenants to try new things. "For retail leases that we sign every year (whether new or renewal), we aim to have about 30 per cent of the tenants come up with new brands in Singapore, or a new concept within the same brand," said Mr Leow, who also oversees the Group Centre of Excellence for Retail Innovation, and is a director of CapitaLand Mall Trust Management.

Tenants may also avail themselves of value-added services provided by CapitaLand, including advice on storefront design and window display, and technology (such as point-of-sale system and inventory management).

CapitaLand also holds a spectrum of seminars and talks for the tenants at various levels, from ground staff to CEO. "When the retailers do well, we do well. We have to help them, we treat them as partners.

"I think that retailers are all very keen to innovate, to change. But on their own, because they are SMEs, it is not easy for them because they don't have the scale. So as a landlord, we need to aggregate the demand and try to help everybody," said Mr Leow.

For instance, the CapitaStar app is a platform to help retailers reward their loyal shoppers, as well as to reach out to shoppers digitally, for instance, through e-deals.

Mr Leow was the CEO and executive director of CapitaLand Mall Asia from Sept 15, 2014 to Dec 31, 2017.

Market watchers note that brick-and-mortar retail stores have been hit by the rise of e-commerce/online retailing as well as other woes such as labour shortage and a leakage of shopper dollars overseas amid the rise of low-cost carriers.

The silver lining from the tough operating conditions perhaps is that it has resulted in a change in the tenant-landlord relationship - from an adversarial one previously to one that is more collaborative.

Among the high points for CapitaLand Group on the Singapore retail mall scene this year have been the successful opening of Jewel Changi Airport and the reopening of Funan, which Mr Leow said have lifted sentiment of shoppers and confidence of retailers.

"We have actually reimagined retail. People talk a lot about experiential shopping, new retail and technology-enabled malls. So we are able to demonstrate through the Jewel and Funan opening that we could bring some of these elements into the shopping experience."