Asking Rents At Specialist Malls Rise By Up To 30%

Source : The Straits Times, Dec 17, 2007

Some retailers pay willingly for locale’s reputation, others prefer mix of shops.

RETAILERS in specialist malls such as Sim Lim Square, Queensway Shopping Centre and United Square have not escaped the tide of rising rentals seen at other malls here.
Some tenants have reported demands for rent hikes of up to 30 per cent when the time came to renew their shop leases.

For some, it makes sense to pay the higher rent and stay put and enjoy the advantages of being in a specialist-themed mall. Others say that more variety in the tenant mix might draw even more shoppers.

A check with tenants at the three malls - well-known for electronic products, sporting goods and children’s products respectively - found that rentals went from a low of about $11 per sq ft (psf) to a high of more than $30 psf.

This is still lower than the $44 psf commanded by retail space in Singapore’s prime shopping belt - Orchard Road.

Knight Frank director of research and consultancy Nicholas Mak said that, despite these rental hikes and the limited walk-in appeal of such malls, setting up shop in specialist malls can make sense.

This, he said, is because a concentration of specialist shops can create a useful ‘cluster effect’ for a retailer.

A grouping of specialist retailers can give a locale a reputation as the ‘place to go’ for such products or services. This attracts customers looking for particular products, and in turn attracts more of such retailers to the mall.

For example, Sim Lim Square is known to both locals and tourists as the place to get electronic products. This means that a visitor to Sim Lim Square is much more likely to buy something than someone visiting a ‘generic, cookie-cutter’ mall, he said.
The owner of computer retailer IT Harvest, who wanted to be known only as Mr Sajan, said he has no intention of moving out of Sim Lim Square, even though his monthly rent is more than $30 psf.

‘Sim Lim…is the IT hub. You can’t do business in electronics elsewhere.’

Likewise, Queensway Shopping Centre is known as the place to go for sporting goods, which is why retailers continue to set up shop there.

In 2002, United Overseas Land (UOL) relaunched United Square, located next to the Novena MRT station, and themed it a ‘Kids Learning Mall’, targeting middle- to upper-income shoppers ‘who want to provide the best for their children’, said UOL spokesman Ruth Yong.

One tenant, who declined to be named, said sales at her children’s apparel outlet are on a par with those at her branch in Suntec City, where she pays a higher rental. The latter mall does not have any specific theme.

The tenant, who has had her United Square outlet for about a year now, said that while ‘traffic is lower than I had expected…it’s not a bad choice’.

But things can also be more competitive in a specialist mall.

For example, while the number of potential buyers of electronic gadgets at Sim Lim is likely to be higher than that at Suntec City, the presence of so many competitors will also make it hard for a new computer parts retailer to stand out and secure a sale, Mr Mak said.

Mall specialisation does not always guarantee hordes of shoppers and, in fact, may deter those who are not looking for those particular products.

This is the concern of one tenant at United Square, where rents have risen by an average of 30 per cent this year, according to industry watchers.

Unlike Sim Lim Square or Queensway, where shop units are owned and rented out by individual owners, United Square is owned and managed by property giant UOL.

One tenant, Ms Cordelia Ling, has approached UOL to ask that she be allowed to break her two-year-contract.

She started her four- month-old children’s furniture shop at the basement in United Square ‘because I thought it was central and the crowd was a good fit, but I can’t even cover my rent’, she lamented.

She pays $13 psf in rent, plus 10 per cent of profits made, for her 468-sq ft, basement-level unit.

Ms Ling puts it down to over-specialisation. ‘There are no walk-in customers, and when the schools do not have classes, the place is practically dead,’ she said.


Specialised appeal

A concentration of specialist shops can create a useful ‘cluster effect’ for retailers.

It can give a locale a reputation as the ‘place to go’ for such products or services.

This attracts customers looking for particular products, and in turn attracts more of such retailers to the mall.