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Singapore’s retail market is undergoing a huge expansion outside the city centre.
By Nikki De Guzman
Decentralisation in Singapore has come a long way since it was first introduced in 1991. The then would-be-developed regional centres are now attracting more attention from consumers and businesses alike, with some even choosing the decentralised areas over the city centre due to its large catchment of population and relative accessibility from residential areas.
As more and more companies turn to the suburbs, regional centres are now considered the areas to watch.
In the first of this two-part feature on commercial property decentralisation, we look at the retail segment and find out what are the advantages and challenges of the move to decentralise shopping mall options to those in town and in the suburbs.
Concept plan
The government’s move to decentralise was to make workplaces closer to homes and reduce congestion and travelling times to and from the city-centre.
First conceived in the early 90s, the government planned to develop new commercial hubs outside the city-centre to provide more choices of business locations while keeping the central business district (CBD) and the Marina Bay area the main commercial hubs of the country. The move was to keep the republic sustainable and alleviate congestion of both people and infrastructure in the central area by creating more options for businesses and companies outside of it.
These commercial hubs formed the regional centres that include Jurong Lake District, Woodlands Regional Centre and Tampines Regional Centre.
Transformation through decentralisation
Initially faced with skepticism for its unconventional locations, decentralisation in Singapore has already proven to be successful with the business boom in the Tampines Regional Centre.
According to Eugene Lim, Key Executive Officer at ERA Realty, a sustained demand for commercial spaces in this area can still be seen until now — over a decade since developing the regional centre began.
The growth witnessed in Tampines also served as the case study for the next emerging regional centre, the Jurong Lake District, which in recent years has seen significant transformation with new developments and businesses rising in the area.
Gone are the days of the traditional stigma of Jurong being an industrial area. Because of the government’s decentralisation strategy, the retail scene in Jurong Regional Centre has gone from being the typical suburban retail enclave to a shopping destination in the west.
In the past two years, Jurong saw the opening of JEM and Big Box, which added a total of 2.1 million sq ft of retail space in the western regional centre. These malls, together with Westgate, JCube and IMM, house a variety of tenants including those traditionally found only in the premiere Orchard Shopping belt. According to analysts, these brands have expanded into the regional centres to take advantage of the steady spending activities found in these areas.
Business as usual
The benefits of retail decentralisation became more evident in recent years when Singapore’s well-known Orchard Road shopping belt faced a slew of falling tourist arrivals resulting in fierce competition for local and foreign dollars. According to Colliers, the recent fall in tourist arrivals has had an impact on Orchard Road malls.
However, unlike the shopping malls in Orchard Road, suburban malls are less susceptible to tourist spending. “Retailers are making inroads into suburban areas to extend their reach where there are sizable residential populations,” the property consultancy said, adding that more upmarket brands are also sprouting up in decentralised areas, especially designated growth areas such as Jurong East.
This advantage propelled the resilience of the retail market in regional centres despite a challenging retail scene in Singapore.
“With convenient access to shopping and dining options at suburban malls, residents no longer need to venture to Orchard Road for daily necessities, retail variety or F&B choices. This is unless there is a specific shopping need or special occasion to dine in a restaurant that only Orchard Road can offer,” Colliers added.
Narrowing gap
As more retail businesses looked to decentralise, malls on Orchard Road began facing geographical competition from malls in the suburban areas. “Disappointing visitor arrivals and weak retail sales continued to put retailers on guard, resulting in their unrelenting resistance towards rental increases,” said Colliers in a retail briefing in 2015.
These challenges had put a drag on retail rents on Orchard Road where monthly gross rents for prime retail space generally remained on a downward trend. In contrast, those in the regional centres managed to continue to hold steady and sometimes nudge up slightly given the support of a ready pool of population catchment, causing rental gaps between Orchard Road and regional centres to narrow (refer to Table 1).
According to Knight Frank’s latest computations as cited in media reports, average prime rent of Orchard Road malls was just 1.09 times of that in suburban malls in the last nine months of 2015, down from 1.12 times and 1.13 times in 2014 and 2013 respectively, reflecting higher resilience among suburban malls compared to those in the prime shopping belt.
This trend, according to property experts, is expected to carry on to this year.
Future supply
There is a notable amount of upcoming supply of retail spaces in the next three to five years and according to analysts, this posts a potential threat to malls already operating in both Orchard Road and regional centres, therefore, many have already embarked on asset enhancement initiatives to stay competitive.
Colliers echoed this saying “with the retail operating environment becoming increasingly challenging, it is imperative for existing malls to continue to upgrade to cater to the fast-changing consumer taste and to stay ahead of the competition.” This is especially applicable to those malls in the regional centres, analysts said, where more and more businesses are sprouting up.
In Jurong, for example, where there is a large quantum of shopping malls, analysts say it is imperative for these malls to carve their niche. In recent months, IMM and JCube have both gone through asset enhancements in response to rising competition in the cluster.
Over at other suburban areas, CapitaMall Trust (CMT) also began asset enhancement initiatives (AEI) for Bukit Panjang Plaza and Tampines Mall. The AEI for Tampines Mall includes converting the roof area on the fifth floor into a new lettable retail space measuring between 25,000 sq ft and 30,000 sq ft, as well as the reconfiguration of retail units to enhance the malls offerings.
According to Knight Frank, an estimated 4.2 million sq ft of net lettable retail space will come on-stream in the republic—averaging 0.8 million sq ft of new major retail space per year. “Close to 1.3 million sq ft net lettable retail space will be completed in 2016. Approximately 42.4 percent—or 0.5 million sq ft of net lettable area—of this upcoming supply, is located outside of the central region.” (refer to Table 2)
As for the government’s plan for expanding businesses outside the central area, more growth areas are being studied for development in the future. “There will be greater emphasis on decentralisation. Existing growth centres outside the city centre will continue to be strengthened,” said the URA. “New growth areas in even more locations will also be introduced to offer businesses alternative options for space, which in turn creates more retail, entertainment and employment opportunities closer to homes.”
Type: Integrated development
Developer: Frasers Centrepoint Limited
Tenure: 99-year leasehold
Facilities: Shopping centre, community club, library, childcare centre
Nearest Transport: Yishun MRT and Bus Interchange
Estimated Completion: 2018
Northpoint City
Yishun Central 1
An upcoming integrated development by Frasers Centrepoint Limited, North Point City will comprise the revamped Northpoint Shopping Centre, an air-conditioned bus interchange, Nee Soon Community Club, town plaza, rooftop community garden, and the 920-unit North Park Residences. It will also contain a childcare centre, the existing Yishun Public Library and children’s play areas.
The refurbished Northpoint Shopping Centre will feature 500 retail outlets spanning an estimated 850,000 sq ft of gross floor area. It will house Nee Soon Community Club, the first community club within a shopping mall, which will occupy 4,000 sqm.
Located in the north of Singapore, Northpoint City is easily accessible via the Central Expressway (CTE) and the Seletar Expressway (SLE). Commuters can also alight at Yishun MRT station, which will be connected to the development’s bus interchange through the future Northpoint Link underpass.
Northpoint City is scheduled for completion in 2018.
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