Magazines Archives - 2011 August

Malls in Asia
Story 4 - Focus

Singapore: Singapore’s mall scene continues rejuvenation amid challenges

Riding on the back of improving consumer sentiment and a booming economy in Singapore, retail sales in the city-state surged to 8.3% in May this year over the same month in 2010, according to the Department of Statistics’ latest report. Combined with the increase in tourist arrivals, which reached a record high of 1.1 million in April, retailers in Singapore are set for an all-round positive year-end season this year.

However, a seeming lull has settled over the Singapore mall scene. In stark contrast to the retail space boom of the past two years, which saw close to three million sqf of retail space open up across the city-state, global property research group, DTZ Research, reveals in its Q2 2011 report that this year would only see the launch of Scotts Square in Orchard Road, adding 91,400sqf of net lettable area (NLA) to the prime shopping street.

In the suburbs, the opening of Changi City Point is the only development expected, adding 207,500sqf of NLA to the local mall scene.

Still, Ho Sing, CEO and executive director of property investment trust, Starhill Global REIT (real estate investment trust) — which manages the Wisma Atria and Ngee Ann City malls along Orchard Road — believes that the retail scene in Singapore is “in the midst of a major transformation”, following the opening of the two Integrated Resorts (IRs) in the city-state.

“The impetus came from the completion of the two IRs which drove up the number of tourist arrivals by 20% in barely 18 months. The government has also rejuvenated the infrastructure, giving the prime Orchard Road shopping belt a major facelift,” Ho continues.

This, states Steven Goh, executive director of Orchard Road Business Association (ORBA), has heralded the entry of new brands, such as US fashion label Abercrombie & Fitch (A&F) and Sweden’s Hennes & Mauritz AB (H&M), into the Singapore market.

While the bulk of new space slated to come on stream this year will be concentrated in the suburbs, Starhill’s Ho points out that the dynamics and retail mix between the suburban and city malls are very different, ensuring a steady influx of new brands into the local market.

“Additionally, new international brands will typically open their first store in Orchard. This is illustrated by the recent entrance of A&F and H&M, which have mopped up most of the available space in prime Orchard locality,” Ho affirms.

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Malaysia: Older malls spruce up to meet competition from new & upcoming malls

This year will see a clutch of new malls opening in Malaysia’s Klang Valley, along with the latest unveilings of 1st Avenue Shopping Mall in Penang and KSL City in Johor Baru. There are no more new malls planned for these two cities. Older malls have undergone refurbishing or are building an extension.

“Currently, there are 300 retail centres in Malaysia offering a total of 114 million sqf of space and enjoying a healthy average occupancy of 80%, says James Wong, managing director of VPC Alliance (KL) Sdn Bhd. “Over the next two years, another 3.2 million sqf of retail space is expected to come on-board in Greater Kuala Lumpur.”

Tan Hai Hsin, managing director of Henry Butcher Retail, estimates about 50-60 new malls opening in Malaysia this year, 16 of which to be in the Klang Valley. Already opened are 1 Shamelin, Citta Strip Mall, 1 Mont’ Kiara, Viva Home, Sunway Giza Mall and The Scott Garden.

KL Festival City, First Subang, [email protected] Business Park in Sungei Besi, Kenanga Wholesale City, Publika, Suria KLCC Phase 2, Plaza Medan Putra, Mines Phase 2, Space U8 (Shah Alam) and Aeon Rawang are also set to open this year.

Tan observes: “The total retail space for Klang Valley in 2010 was 49 million sqf. For this year, it is expected to increase by another 3.5 million sqf. The greatest challenge for shopping centres today is not about theme and concept. It is about market saturation. There is too much retail space chasing for the same customers.”

For the past four years, new shopping centres in Malaysia have been finding it tough to fill up a majority of their retail units (at least 80%) upon opening. Several shopping centres are also facing difficulties in getting the right anchor tenants whether it be a hypermarket, supermarket, department store, cineplex or a bowling alley.

Yet many developers are still planning for shopping centres (big and small) throughout the country. In the next few years, he suggests several scenarios will occur.

Many planned shopping centre projects will not get started because the developers will fail to get bank financing. Banks are reportedly very careful in lending money to developers of shopping centres.

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Philippines: Manila gets serious with mall expansion

Foreign investors say that they really just look at two factors when deciding where to put their considerable funds: the product and the market. They ask themselves, will their product fly off the shelves in that country or place, and is the potential pool of customers large enough to justify the risks in terms of time and resources?

If the answer is yes for both questions, then it is a go for investment. This helps explain the continued investments in shopping complexes or malls by the Philippines’ largest mall operators. The growing number of Filipinos with money to burn on food, clothes, gadgets and services in malls represents a market that is just too lucrative to be ignored, thus making it profitable for these retail giants to continue pouring funds in new malls across the country.

According to the latest report of property consulting firm CB Richard Ellis (CBRE), personal-consumption expenditure in the Philippines has been growing steadily over the past few years, rising by 6% in 2010 and growing by another 1.5% at the end of Q1 this year.

Total expenses were pegged at close to Php4 trillion (US$94 billion) as of the end of 2010, and should grow even more this year because remittances from overseas Filipino workers (OFWs) are proving to be resilient, growing by 6% so far this year, despite economic challenges in traditional sources of remittances, such as the US and the Middle East.

Also contributing to the consumption economy is the burgeoning business process outsourcing (BPO) sector in the Philippines, which is employing hundreds of thousands of mostly young Filipinos, who are only too eager to spend their considerable monthly earnings on the latest apparel and gadgets.

Given the cash lining the pockets of families of OFWs and the country’s growing middle class, the retail industry stands to benefit greatly. Already, the gross value added of the retail sector in the Philippines was pegged at Php200 billion with the expected growth this year pegged at 9%.

To cash in on that growth, the SM Group, the biggest retail player in the Philippines, will put up three malls this year to add to the 41 malls it already has in the country with five million sqm of gross retail area serving three million people every day.

“Our expansion programme continues ues. We opened SM City Masinag on the eastern part of the capital of Metro Manila, and will be opening new malls in San Fernando, Pampanga; Olongapo in the northern part of Metro Manila; and Consolacion in Cebu in central Philippines,” says SM Group’s vice-president, Millie Dizon.

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India: Sizewise, India moves from myths to malls

As far as the growth of the Indian retail sector is concerned, the projections cannot be more flattering. The BMI India Retail Report Q1 2011 forecasts that total retail sales will nearly double from Rs18.85 trillion (US$424.3 billion) in 2011 to Rs26.64 trillion by 2014, backed by the creation of organised retail infrastructure as well as strong economic growth, population expansion and wealth creation — all of which will move more people into the consuming middle class.

A 2008 Indian Council For Research on International Economic Relations (ICRIER) study projected that the share of organised retailing would grow from 13% in 2006-07 to about 18% in 2010-11. International consulting firm Knight Frank goes a step further. In its recent report, titled India Organized Retail Market: Diagnosis & Outlook, it projects a 31% growth per annum for organised retailing in India between 2009 and 2012.

According to McKinsey India, rich Indians have so far grown richer at twice the rate than anyone predicted. Furthermore, the number of households that can afford branded luxury lifestyle products will double from 40 million households (200 million people) now to 94 million households within the next 10 years.

Add to this the fact that 240 million Indians are below the age of 18, while another 300 million fall in the consuming group of 18-36 years of age — and you have a winning mix for retailers.

Very broadly, growth in retailing is likely to be fuelled by growth in consumption, which is probably to be as follows: by 2015, 250 million Indians will have access to the Internet and smartphones; 300 million will have access to digital TV; 100 million Indians will watch movies in multiplexes; and 50 million will own laptops and notebooks. The target population for lifestyle consumption products and services will be in the range of 50 million-250 million users.

Furthermore, research by New Delhi-based management consulting firm, Technopak, highlights the fact that while Indians would continue to spend heavily on needs-based merchandise and services such as food, grocery, textiles, footware, healthcare, consumer electronics, durables and travel, a new category of spending could also grow, giving rise to new business opportunities.

These would include spending needs such as home & décor; personal transport vehicles; accessories such as jewellery, wristwear and handbags; stationery; grooming; well-being; coaching & learning; leisure & recreation; socialising; and other lifestyle-related expenditures.

Interestingly, as consumption of new and traditional products and services has grown and is likely to continue to grow anywhere between 2.5 and five times between 2010 and 2015, the retail sector would have to step up both in terms of investments as well as in creating retail infrastructure to service this demand.

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