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Big boys muscle in on empty space as retail rents slip amid Covid
Smaller retailers and eateries could increasingly be replaced in malls by big brands with the wherewithal to capitalise on rental declines.
Even as Covid-19 restrictions chip away at the bricks-and-mortar consumer sector, the retail scene has accelerated an ongoing transformation, observers told The Business Times.
New openings are likely to include brands that began online and are muscling into offline commerce, industry watchers said. Click-andcollect venues, as well as flagship concept stores, could also grow as the industry goes omni-channel.
Wong Xian Yang, head of research at real estate services firm Cushman & Wakefield, now expects weaker brands to exit the market, “while the stronger brands leverage on lower rents and weak market sentiment to expand and secure prime space”.
Jonathan Denis-Jacob, director of advisory and consulting at Colliers, added: “What we observed over the past year or so is a consolidation of the retail footprints of growing brands who have taken over spaces vacated by declining brands.”
The shift in tenant profiles comes as more retailers are expected to face insolvencies, amid the protracted crisis of the Covid-19 pandemic.
Terence Yow, chairman of tenant lobby group Singapore Tenants United for Fairness, told a press conference on July 21 that small businesses “are competing with the biggest international F&B and retail chains, often for the same space”.
“These guys have much deeper pockets, and we have seen a lot of them come in and take over some of the spaces that have been left in recent months,” he added.
One retailer that has enlarged its store footprint is baby product seller Mothercare, which opened an 11th outlet in Jurong Point in June, and relaunched its Paragon branch in July.
When asked why the brand is expanding, Pang Fu Wei, group managing director of Mothercare operator Kim Hin International, said to BT: “For the next couple of years, there’s already a hollow-out effect of sales from Orchard Road to the suburbs.
“So we wanted to take advantage of the lower rents at this point to lock in a good mall like Jurong Point that could be just as expensive as Orchard Road (pre-pandemic).”
Besides the natural “overdue spring-clean of weaker businesses” in a down-cycle, the Covid-19 pandemic has thus raised the chances of a “feeding frenzy”, Mr Sandison told BT.
The changes build on ongoing trends in the retail market, such as a boom in food and beverage (F&B) and a flight from offline leisure venues.
Remarked Lam Chern Woon, research and consulting head at property firm Edmund Tie: “We do not think the proportion of large retailers will change significantly, but there could still be interesting shifts, especially if malls sign on co-working operators to cater to the new hybrid work paradigm and the rise of the gig economy.”
As Mothercare’s Mr Pang said of his new Jurong Point tenancy: “Recently, because of Covid, rental rates have come down and they are a lot more amenable to discussing a rental which works for me… so lock in, for the next three years.”
Still, Cushman & Wakefield projected in its latest second-quarter report that prime retail rents will be supported by a limited new supply and strong demand in top-tier malls.
“Despite the challenging retail landscape, F&B chains and prominent international brands continued to expand."
Mr Wong and commercial leasing head Mark Lampard wrote.
They cited recent expansions by Catalistlisted Katrina Group’s So Pho, burger joint Shake Shack, bubble tea chain AtTea, and other brands. Cushman & Wakefield’s rosy outlook came even as retail rents fell 1.8 per cent quarter-on-quarter on steeper falls in the Orchard and city regions, where vacancies were elevated.
To be sure, Li Yan, a senior lecturer at Nanyang Business School, remarked that the loss of small and medium- size enterprises (SMEs) could be detrimental to the downtown retail and F&B scene in the long run.
He warned of the potential “dilution of a representation of local spirit and identity… which is one of the highest perceived values of Orchard for many foreign tourists”.
Mr Yow also lamented that shuttered SMEs are being replaced by “big foreign chains that still have a lot of investor money… who still view Singapore as a place where they are willing to put in money, not necessarily to make profit” but for showcases.
Yet, retailers left standing are not only big fish cannibalising small fry.
Clive Choo, who is also senior lecturer at Nanyang Business School, noted that bricks-and-mortar retail was under pressure even before the pandemic struck Singapore.
The ability to blend online and physical retail is thus more important, he told BT: “Most investments by these big boys should anchor on a long-term perspective and not just being opportunistic and decide based on a short-term rental gain.”
Source: The Business Times
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