Retail industry still quiet in first quarter

RETAILING remains stuck in the doldrums with shoppers continuing to flock to cheaper regional cities while mall owners come to terms with a market that has turned in the tenant’s favour.

The sector’s woes were underlined on Thursday when F J Benjamin Holdings, a regional retailer and brand distributor with 35 stores here, reported a net loss of $6.98 million after restructuring efforts in the first quarter.

Sales here were hit by “weaker consumer sentiment” and the economic slowdown in China, which has affected tourism in South-east Asia, the group said.

A glance at Singapore’s market for shop space also shows weaker rents across the board.

“New malls are taking longer to fill… and recently refurbished, smaller-sized suburban malls located in less mature neighbourhoods tend to be the hardest hit,” said Dr Chua Yang Liang, JLL research head for Singapore and South-east Asia. “Physical occupancies in these malls, upon opening, hover around 50 per cent.”

While real estate investment trusts (Reits) that manage a spectrum of malls here posted positive rental reversions in the first quarter, some new centres have posed more of a challenge than others.

Frasers Centrepoint Trust achieved an average rent reversion of 3.8 per cent across its portfolio of six suburban malls in the first quarter, down from 7.7 per cent in the previous quarter.

But excluding Bedok Point, which opened in December 2010, its average rental reversion for the quarter would be 5.2 per cent. The mall posted a sharp 31 per cent negative rental reversion because of incentives offered to retain one large food and beverage outlet.

“Management has guided that prospects remain uncertain for Bedok Point and it may have to continue offering low rents to achieve its tenant mix,” noted PhillipCapital last month.

And in what may be a sign of the times, OUE Hospitality Trust, which owns Mandarin Gallery, said on Thursday that it expects to maintain stable income, because the mall’s rental income comprises mainly fixed rent.

Maybank Kim Eng analyst Joshua Tan said: “General economic conditions are not great. Personal incomes are not growing fast, we are below trend for gross domestic product – it is a demand problem.”

When CapitaMall Trust, which runs 16 malls, delivered first-quarter earnings in line with expectations last month, it suffered a small negative stock reaction.

But there are bright spots: The upscale Capitol Piazza, which has been progressively opening since last month, has secured several new-to-market retailers and food and beverage concepts, and let out most of the mall.

“While some anchor tenants in major malls are reviewing their leases, with a number of them downsizing their operations or contemplating exiting the Singapore market, there are just as many who are growing or entering the market,” said Dr Chua. “The retail market often undergoes a natural renewal as tastes and preferences change.”

Nevertheless, competition has intensified as world-class malls spring up in Bangkok, Kuala Lumpur and Jakarta.

Starhill Global Reit, which has stakes in Wisma Atria and Ngee Ann City in Orchard Road, has responded by diversifying overseas.

Last month, it announced plans to buy Myer Centre Adelaide for $303.7 million, calling it a likely destination for international retailers who are expanding out of Australia’s more mature cities.

Analysts have also suggested that Singapore’s retailers explore ideas outside of the cookie-cutter.

“The network for budget travel is so extensive; come up with something to attract budget travellers,” said Ms Christine Li, research director of Cushman & Wakefield.

http://business.asiaone.com/news/retail-industry-still-quiet-first-quarter#sthash.UTACUVIi.dpuf

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s