Retail karma brings little cheer to Singapore landlords

THE giant sucking sound building up in Singapore's empty shopping aisles just got louder. After a 174-year run, John Little, a well-loved department store, plans to shut down by January.

Completing the karmic circle of birth and death, Amazon.com Inc may start operations in the city in the first quarter of 2017. That's scant comfort for retail landlords. A market capitalisation-weighted index of five real estate investment trusts (Reits), led by CapitaLand Mall Trust (which counts John Little as a tenant in its Plaza Singapura mall), has dropped 7 per cent so far this quarter. More trouble may be looming.

With a vacancy rate of 8.4 per cent, shopping spaces are already the emptiest in almost a decade. And that's with e-commerce accounting for just 2 per cent of total sales. Considering that 20 per cent of China's retail is already online, industry forecasts of 7 per cent e-commerce penetration in Singapore by 2025 may be a "gross underestimation", says Raghav Kapoor, CEO of Smartkarma, a research website. Add to that a slowing economy, and non-vehicle sales that have failed to grow since early 2014, and it's quite clear why most retailers are struggling.