Fashion, Sports Tenants Pay Highest Base Rents

Source : The Business Times, October 6, 2007

FASHION, sports and fitness and gift and specialty retailers pay the highest base rents at CapitaLand's malls, the developer said yesterday.

In comparison, department stores, supermarkets and hypermarkets, leisure and entertainment and educational tenants pay the lowest base rents.

The rents do not take into account turnover rent. Most retailers in major malls pay a base rate as well as a proportion of their takings as rent.

Figures provided by CapitaLand showed the average base rent across its malls - including those in its listed real estate investment trust CapitaMall Trust (CMT) - is $9.66 per sq ft per month (psf pm).

But fashion retailers paid more than $20 psf pm on average, while sports and fitness and gift and specialty tenants paid more than $15 psf pm.

On the other hand, department stores, supermarkets and hypermarkets, leisure and entertainment providers and educational tenants pay less than $7 psf pm on average.

Only warehouse and office space went for less, CapitaLand's figures reveal.

Pua Seck Guan, chief executive of CapitaLand's retail arm, said many malls are doing away with anchor tenants because these tenants - typically department stores, supermarkets and hypermarkets and leisure and entertainment providers - pay lower rents.

And the pressure is on shopping centre managers to get high rents to deliver good returns to stakeholders.

'If you want to get decent returns you need to look at the rentals,' Mr Pua said. 'It's all because of market forces.'

For example, land for shopping malls is now being tendered for as much as $1,500-$2,500 psf per plot ratio (psf ppr), he said.

This means the breakeven cost for a mall owner could be as high as $4,000 psf ppr, meaning the owner has to look for tenants who can pay the best rents.

Also, unlike in the past, not all malls require a large anchor tenant to attract shoppers, Mr Pua said.