In the write-up by the CEO of International Property Advisor Pte Ltd, Ku Swee Yong, he detailed his observation when he visited 10 malls in the country in February to see if it is indicative of the data released by The Urban Redevelopment Authority (URA).
The URA announced that the“prices of retail space increased by 1.8% in 4th Quarter 2019, compared with the increase of 1.1% in the previous quarter. Rentals of retail space increased by 2.3% in 4th Quarter 2019, following the same increase of 2.3% in the previous quarter.
For the whole of 2019, prices of retail space increased by 1.3%, compared with the increase of 0.6% in 2018; while rentals of retail space increased by 2.9%, compared with the decline of 1.0% in 2018.” However, these figures may not reflect the actual realities on the ground.
In November 2019, retail sales did not increase despite more crowds frequenting the malls. For the 10th consecutive month, dollar value of retail sales declined. Without including motor vehicles, the year-on-year sales fell 0.6 per cent with categories “Department Stores” and “Furniture & Household Equipment” showing the largest decline at -8.4 per cent and -10.9 per cent respectively.
Singstat figures show that in November 2019, the total retail sales value was S$3.6 billion, with 8 per cent being accounted by online sales at about S$288 million courtesy of online shopping events like Black Friday and Singles’ Day.
Food & Beverage services saw revenue reach a total value of S$898 million after experiencing 5.5 per cent year-on-year growth in all categories.
Nonetheless, the data looks pessimistic if visitors to Singapore are also taken into account.
Comparing International Visitor Arrivals to Singapore year-on-year, November 2019 saw an 8.9 per cent increase to 1.53 million visitors compared to November of the previous year. Tourists from China increased by 12.9 per cent year-on-year to roughly 249,000 individuals, and this figure accounts for 16.3 per cent of all visitors.
The fall in foreign tourists, alongside lower retail sales value and higher F&B sales suggest that tourists reduced their spending. Also, they spend less on shopping and more on food items.
Despite being the festive seasons in the form of Chinese New Year which will soon lead into Valentine’s Day, the Coronavirus outbreak and the resulting government directives and measures have induced visitors to stay away from malls.
Mr Ku noted that there were less crowds at heartland malls compared to the crowds in the non-festive months. Also, there was less traffic at Somerset and Orchard MRT stations despite it being a Saturday afternoon, Mr Ku added.
Several malls along Orchard Road also housed crowds the size that would normally be seen during non-festive season and the number of shoppers with shopping bags was also not as many.
In the coming few months, the contributions of Chinese visitors’ shopping and consumption, as well as foreign visitors’ spending will slow down due to the risks posed by Coronavirus, he stated.
Last year, among other struggling retailers, Honestbee, the food delivery and online grocery company who was deep in liquidation, offered its lenders 3 cents per dollar, whereas the remaining debt was converted to shares.
The state of e-commerce players and retailers are not fully reflective of the GDP per capita, growth of household income and increasing wages that Singapore prides itself on, he commented.
The URA report showed that in Q4 of last year, 5.05 million sqft of rentable retail space is empty which amounts to 7.5 per cent vacancy rate. This rentable space is about five times the space of VivoCity, the biggest mall in the country. The URA data also shows some discrepancy between the declining financial performance of retailers and the number of vacant shops with the increased rentals and prices of retail space in the last year.
Mr Ku remarked that the struggles of retailers may yet continue and some of the small strata-titled malls are now dubbed as “ghost malls” by observers.
He also pointed out that there is a new entry titled “Uncompleted Commercial Projects with Approvals for Development” within the URA data. The new entry highlights that Planning Permission for a mixed development project the size of 622,000 sqft of retail was obtained by Changi Airport Group (S) Pte Ltd last November.
Mr Ku concluded with the question, asking if this is another gem in Changi’s crown or is it merely the quickly transferring the country’s ailing retail sector from the ICU straight into the coffin?