Divvying up Robinsons' space a better leasing option

Singapore

WITH substantial plots of prime real estate to be vacated when Robinsons Singapore exits, The Heeren and Raffles City Shopping Centre's landlords could divide the plots into smaller ones, rather than wait for a major tenant to take over the vast spaces, real estate observers have said.

Robinsons occupies a roughly 85,000-square feet (sq ft) space, spanning three floors, in Raffles City. Its flagship at The Heeren takes up 186,000 sq ft of space, over six floors. They are prime, street-facing retail shop fronts along Stamford Road and Orchard Road respectively, and are hard to come by, noted Ethan Hsu, head of retail at Knight Frank Singapore.

But the plots are expensive to rent. Even though prime retail rents fell across the board in the third quarter of this year, Christine Li, head of research for Singapore and South-east Asia at Cushman & Wakefield, noted that the average rent for the Raffles City area is still S$20.25 per square foot (psf) per month. In Orchard, where The Heeren is, the average rent works out to S$33.73 psf per month.

The size and capital outlay required for the spaces may thus limit their demand in the current Covid-19 crisis. JLL Singapore's senior director of retail Lee Siew Ling said the spaces are "unlikely to be absorbed readily" by a single tenant or concept in the current market.

Co-working space operators would have been strong contenders due to the rising interest and growing number of operators 12 to 18 months ago, she said, but added: "However, the large size of space and capital investment required for fit-out may pose a challenge for some. Therefore, demand may be limited now."

The operating conditions for retailers also remain challenging, with footfall at malls yet to recover to pre-pandemic levels and the implementation of social distancing.

Desmond Sim, CBRE's head of research for South-east Asia, said: "Large format stores may be under pressure. It's not wise to sit and wait for a like-for-like tenant to fill the space."

National University of Singapore Business School associate professor Lawrence Loh added that large, premium brands would be needed to maintain the image of those malls. However, the usual "blockbuster" retail names like H&M and Isetan are already facing challenges on their own, and rapidly growing brands like Don Don Donki may not fit the image, he said.

Recent notable retail openings have included Apple's store at Marina Bay Sands and Decathlon at The Centrepoint, which, incidentally, has replaced department store Metro.

Alix Goursat, business development director of Decathlon Singapore, said the retailer's expansion strategy is driven by its ability to create an experience and convenience for customers; Decathlon has adopted an omni-channel strategy in Singapore, meaning that its physical stores complement its online one.

"Location is very important to us," Ms Goursat said. "In order to develop experiential concept stores, the location should be large enough - more than 35,000 sq ft - and located in a high-traffic area, next to transportation hubs for example, for convenience and easy accessibility."

Robinsons' last two stores are "definitely in prime locations", she noted.

Ikea said that it is committed to opening its third store in Singapore at Jem shopping centre in Jurong next year, and is currently not looking for further lease space. The space at Jem was previously occupied by Robinsons until it moved out this year.

Apple and co-working space operator JustCo separately said they were unable to comment.

A better alternative may thus be to split the retail plots at Raffles City and The Heeren into smaller ones, the analysts said. Doing so not only achieves higher rents psf, but also makes it more feasible for brands to lease.

Mr Hsu said Knight Frank has received "some interest" from overseas lifestyle retailers to start a flagship store in Singapore, as well as from established lifestyle and entertainment operators looking to start new concepts aimed at "a new breed of shoppers" post-Covid.

Cushman & Wakefield's Ms Li noted that the athleisure trend is "booming", with Foot Locker opening its sixth and largest store yet, spanning 23,000 sq ft, at Orchard Gateway @ Emerald.

Amid the uptick in e-commerce, online retailers may also pursue a "clicks-to-bricks" strategy and open physical stores to gain more sales and brand recognition, she added, citing clothing retailer Love, Bonito's newly opened 4,300 sq ft store in VivoCity.

The exit of an anchor tenant, while unfortunate, can be an opportunity for the landlords to rethink the positioning of the malls. This is especially so for The Heeren, where the proportion of space taken up by Robinsons gives it a chance to rejig its theme, said Mr Sim of CBRE.

The mall's last major revamp was around seven years ago, when Robinsons moved in as the anchor tenant.

In the years before that, two anchor tenants - record shop HMV and F&B operator Marche - had exited. They left behind a hodgepodge of brands like Swatch and Spinelli Coffee, which eventually moved out as well.

After Robinsons vacates the space, only a few tenants will remain, including Luke's Oyster Bar & Chop House and Tsui Wah Singapore.

Swee Cheng Management, which operates The Heeren, said it is still in talks with Robinsons' provisional liquidators. "We are currently exploring our options for the retail space, to ensure the best fit for The Heeren," it added.

Likewise, a spokesperson for Raffles City said: "We are in discussions with Robinsons on the smooth handover of the premises. Shoppers can look forward to a refreshed Raffles City tenant mix with the introduction of exciting offerings. More details will be shared in due course."