It's official: Singapore malls are dead, as occupancy reaches its lowest level in 10 years

It's official: Singapore malls are dead, as occupancy reaches its lowest level in 10 years

Can't say that nobody saw this coming.

As developers build more shopping malls all over Singapore, from the heartlands to the central business district, there's bound to come a time when the bubble will burst, and there is an oversupply of shop spaces.

It seems like that that time is now.

Mall Vacancies Highest In A Decade

Walk into any shopping mall in Singapore today, and chances are, you will be greeted by empty or boarded up shop spaces, and this is no isolated occurrence either, as there are now the statistics to back it up.

Bloomberg ran a report recently where they obtained some facts and figures from the Urban Redevelopment Authority (URA) about the overall retail outlook in Singapore.

They highlighted that vacancies found in shopping malls today are at their lowest since 2006, even though rental rates have declined 1.5 per cent in the past three months, as the demand for shopping spaces decreased significantly. Digging Deeper

To get a better understanding of these findings, I went straight to the source.

Photo: URA

In this simple table by URA, we can see that rentals and prices have gone down as compared to the last quarter, while vacancy rate has increased.

Photo: URA

Here's a clearer image of how rentals have gone down; all the way from late 2011, and comparing current figures to every quarter until then, we see the graph on a downward trend to its lowest point today.

Photo: URA

While prices have technically gone down in the same timeframe as rental amounts, they have more or less stabilised in the past five years.

But wait, there's more.

Photo: URA

This is where it gets worrying.

These charts show the amount of retail space supplied by projects that are in the pipeline, and as you can see, next year, and the year after that, the amount of retail space is set to triple and quadruple respectively.

Why Is This Happening?

Two reasons, the current economy and Singaporeans' preference for online shopping.

As shoppers cut down on spending amidst the slowing economic outlook, there isn't a need for them to even visit brick and mortar stores, but that also doesn't mean that the shopping stops.

Did you know that Singaporeans are probably one of the more online savvy shoppers in Asia? According to MasterCard, a large percentage of us actually shop more online as compared to our peers in the region.

Photo: The Straits Times

On top of that, our retail stores are also feeling the brunt from the lack of tourist dollars coming in, as tourism spending declined for the first time in six years in 2015, even when visitor figures grew.

This is especially the case with mainland Chinese visitors, as they, too, don't spend as much anymore due to China's slowing economy.

And It'll Just Get Worse

Look around anywhere in Singapore, and you will find some new development project being built.

In the same URA findings, even office spaces and residential figures are suffering a decline. However, construction is still happening throughout the year for new office buildings, condominiums, and shopping malls.

At the rate things are going, we will not just see pop-up stores slotting into empty retail lots, we can literally hold sporting events and concerts at these soon-to-be empty shopping malls.

Perhaps Running Man should finally come to Singapore - our barren malls would make for a great place for their popular name tag elimination chase.

No tenants, and no shoppers

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    Empty shopfronts and hoardings are not what you would expect to see at newly renovated shopping complexes, and even less so along Singapore's premier shopping street.

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    Yet that is what you will find when you walk into many of the malls in town.

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    From Orchard Road to the Marina Bay area, malls are struggling with too much retail space, as landlords scramble to attract and retain tenants.

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    This dire retail pickle has made hoardings with stock phrases "Working to serve you better" and "A new shopping experience awaits" the default decor in many malls.

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    It is a classic chicken-and-egg situation. Empty and boarded-up spaces give a poor first impression and attract few customers. Low footfall is bad news for existing tenants and fails to attract new ones.

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    At Shaw Centre, which reopened in 2014 following a massive renovation, about half of the units in the five-storey mall are behind colourful hoardings displaying contact details for leasing inquiries.

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    Next door at Pacific Plaza - once home to Tower Records and fashion brands Miu Miu and Prada - the same dismal scene beckons. Save for an Adidas Originals store, all units on the ground floor are vacant.

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    Stretches of vacant units can be seen in Claymore Connect, the former Orchard Hotel Shopping Arcade. It reopened last October after a revamp and two F&B units have already opened and shuttered in the four- storey mall.

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    Millenia Walk's management says the mall has increased occupancy by more than 20 per cent in the last year and is on track to achieve its occupancy goal of more than 90 per cent by the end of the year.

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    Potted plants are used to fill up space on level two, where there appears to be more empty units than occupied ones.

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    The entire section where Harvey Norman used to be has been cordoned off. A fitness and performance centre is slated to take over the space in October.

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    Bank executive Melissa Tan, 31, who works at one of the nearby office towers, says she goes to the mall for lunch with her colleagues. "Apart from the food, there's nothing much for me to buy or see here."

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    Over at Suntec City, a $410- million redevelopment plan, which took three years to finish, does not seem to have attracted enough tenants to fill up the vast expanse of retail space.

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    One section between Towers 2 and 3 on level three is almost a deadzone. Kiddy rides fill some of the empty spaces.

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    Vacated shops have paper crudely pasted over their signboards and some tenants seem to have left hastily, leaving behind store furniture and display shelves.

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    A store assistant at a furniture shop on that level, who wants to be known only as Mr C. Ho, 38, says he has seen tenants come and go in just the six months that he has been working there.

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    With The Centrepoint currently undergoing renovations, bright red and white hoardings can be seen on nearly every level.

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    While the boards feature happy faces and mouth- watering food pictures, they also make the place feel like a building in stasis.

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    Orchard Road has been especially hard-hit by a dip in tourism spending, which declined 6.8 per cent to $22 billion last year.

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    At Orchard Central, tenant Michael Chen, 35, says: "From levels one to four, there're so many hoardings because of renovation, it's like a dead mall."

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    The renovations are scheduled to be completed later this year. The shops on the lower levels are open for business, but the hoardings make these stores more difficult to find.

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    The many hoardings also give the impression that the entire mall is closed for renovation.

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    A salesman at a boutique on level five, who declines to be named, says: "Sales have dropped by more than 50 per cent since the renovations started."

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    "People think the mall is closed. Especially tourists. When shoppers see that level two has so many hoardings, they don't go to the higher levels."

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    Walking around Wisma Atria, the units are fully filled at basement one and there is a healthy crowd at Food Republic on level four.

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    But levels two and three are rather quiet, after department store Isetan closed last year. It is in the midst of renovations and leasing out the space.

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    From now till June 30, level one where Isetan used to occupy, is taken up by a pop-up flea market by Workshop Element (W.E.) and Togetherly.

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    Though the higher levels of the mall are mostly filled with various tenants that include fashion outlets, jewellery stores and hair and nail salons, the first level of Far East Plaza looks almost deserted.

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    While levels two through five have the odd handful of shuttered units, level one has at least 20 empty units.

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    The only busy spaces on the level are the F&B outlets which include bubble tea store Gong Cha and noodle restaurant Eat.

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    In spite of the many vacant units and stretches of hoardings, landlords contacted say their malls have a healthy occupancy rate: Mandarin Gallery says it is 94 per cent occupied while Orchard Gateway is 98 per cent occupied.

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    But tenants tell a different story. A tenant who wants to be known only as Mr Ho, 52, has a store in basement two in Orchard Gateway. "We see fewer than 10 walk-ins a day. Some days, we don't even make any sales."

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    At Mandarin Gallery, there are many empty units on levels two and three. Some have concrete flooring showing, while others are dusty. The busiest-looking areas of the mall are the rest areas, where the couches are usually fully occupied.

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    Landlords are trying various ways to fill quiet aisles, from offering space to pop-up stores to cutting rentals. Orchard Gateway and Orchard Central offer some tenants rental rebates of between 20 and 30 per cent a month.

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