Retail rents for underground malls seen to rise 20%-40%

Some analysts have said retail rents for underground malls in the city could rise by between 20 and 40 per cent in the years ahead, as the Singapore government rolls out plans to improve the rail network.

The Land Transport Authority will spend S$60 billion over the next decade on initiatives to ease passenger congestion.

Market watchers added that the move could also direct more traffic to underground malls.

As of July, about 1.7 million commuters ride on MRT trains everyday.

That is up by 24.7 per cent compared to 2008.

With new plans to enhance the rail network, analysts expect ridership numbers to go up further. And this could point to some upside for retail rentals.

Charles Ng, who is director of retail at Colliers International, said: “Certainly I think rents will go up; it is always in proportion with the traffic flow. Landlords will always think that with greater traffic, tenants will enjoy better business”

To justify the rent increase, analysts said landlords may have to step up marketing efforts and improve mall layout to drive more shoppers through, while retailers should spruce up their shop front displays and use commercial space more efficiently.

Currently, the average rent for retail space at underground malls works out to about S$15 per square foot.

Lin Jinshu, an investment analyst at SIAS Research, said: “there is a significant mass of retailers that are occupying spots in MRT stations. So I see some opportunity for them to band together to offer some sort of promotions and deals to attract shoppers and to attract people to start viewing MRT station malls as a shopping venue as well.”

Experts also suggest a more diverse tenant mix at underground malls to cater to passengers on the go.

These include supermarkets and more F&B outlets.

Among the underground malls in the city, market watchers expect rentals at CityLink Mall to rise more sharply compared to Xchange malls located at MRT stations.

They said that is mainly due to its convenient layout and higher volume of pedestrian traffic.

Mr Ng said: “It has a lot to do with configuration. If you look at Dhoby Ghaut and say Tanjong Pagar Xchange, commuters can just walk through without having a look at the shops. This is unlike say CityLink Mall. Everybody has to walk through from point A to point B; invariably, we have to pass by the shops. That is where I think that rents will be a difference.”

Source : Channel NewsAsia – 9 Sep 2010