Downtown malls vs suburban malls

The results of a recent survey of tourist destinations released by the Association of Singapore Attractions last week were an eye-opener.

In spite of our island city receiving a record 11.6 million visitors last year – due in no small part to the debut of our two integrated resorts – nearly half of the 31 attractions surveyed reported a fall in the number of visitors – by up to 28 per cent in some cases.

With the exception of the China market, a closer look at our tourism statistics shows that it was the regional markets – Indonesia, Malaysia, the Philippines, Thailand and Vietnam – which registered the strongest growth rates.

A former student intern from Bandung, Indonesia, told me it was much more convenient for her and her friends to come to Singapore via the budget airlines than for them to go to Jakarta for their entertainment and shopping. The flight time was also shorter. Budget airlines have certainly brought the regional markets a lot closer to Singapore, which is conveniently positioned in a central location.

The uneven performance of tourist destinations in Singapore is also probably true for our downtown malls. Some are doing very well, while others are fast losing their allure. Aside from the booming suburban shopping centres, it appears that the rest of the industry is going through a shake-out. And it appears that no downtown mall is spared, even the seemingly-successful new ones.

Landlords of suburban malls have found the winning formula for pulling in the crowds within their catchment areas. Find a location, preferably adjacent to, or better still, atop an MRT station. Next, put in a cineplex, food court and a huge supermarket. Any other attraction or anchor tenant is a bonus.

However, what works for suburban malls does not necessarily hold true for the downtown ones.

Two of the more successful downtown malls in my opinion – Takashimaya and Centrepoint – are not the closest to the MRT stations in their locations. And you can certainly pick malls which disappoint although they are the nearest to the exit points of the train stations.

In the past, downtown malls attracted the affluent and a stream of local shoppers from all corners of the island. Today, they have lost a significant proportion of their domestic market to suburban malls. Local shoppers need a good reason to visit the city malls. One of these is to meet friends and that is why there are a lot more F&B outlets and fine dining restaurants in the downtown malls. However, meeting friends is most convenient only in the evenings and at weekends.

Compared to a decade ago, there has also been a tripling or quadrupling of shop space in the downtown areas. So, there is definitely more competition. Frequent traffic jams and high parking charges are also limiting the number of trips made by the affluent segment. The pool of resident city shoppers is definitely smaller.

Fortunately, our integrated resorts have come to the rescue. Because of them, there are a lot more visitors to Singapore. Take a train in the city during working hours and you will find foreigners outnumbering locals by at least four to one. Besides English, I have overheard chatter in Bahasa, Thai, Vietnamese, Korean, Tagalog, French and the odd African and Eastern European language.

I understand that well-to-do Indonesians like Takashimaya and shops in Ngee Ann City. Many are repeat customers. Once in Singapore, they waste no time and head straight to their favourite malls and shops. This is because they already know the service standards and the quality of the merchandise. However, this can only happen if there is stability of tenants. These shoppers do not have much time to window shop or look around elsewhere.

There are no detailed statistics to show it but I believe most of our recent arrivals from the region are frequent visitors, which may explain the drop or fluctuations in attendance for some tourist destinations.

I think downtown malls need to recognise that finding a market niche – which is tough in itself – is no longer enough but stability of tenants is just as important with the current profile of visitor arrivals.

So maximising rentals today – by quickly replacing existing tenants with higher paying ones – may be working wonders for suburban malls but it is counter-productive to the longer term success of the downtown mall.

By Colin Tan – Head of Research and Consultancy at Chesterton Suntec International.

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