Underground’s getting costly

Retail rents for underground malls in the city could rise by between 20 and 40 per cent in the years ahead, as the Government roll out plans to improve the rail network, according to some analysts.

With the Land Transport Authority set to spend $60 billion over the next decade on initiatives to ease passenger congestion, market watchers said the move could also direct more traffic to underground malls.

Around 1.7 million commuters have been taking the MRT as of July – 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 could provide some upside for retail rentals.

“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,” said Charles Ng, director of retail at Colliers International.

To justify the rent increase, analysts said landlords may have to step up marketing efforts and improve mall layout to drive more shoppers through the mall.

Retailers on their part 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 $15 per square foot.

“There’s 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,” said Mr Lin Jinshu, investment analyst at SIAS Research.

Experts also suggest a more diverse tenant mix at underground malls to cater to passengers on-the-go. These include supermarkets and more food and beverages outlets.

Of 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 mainly due to its convenient layout and higher volume of pedestrian traffic.

“It has a lot to do with configuration. If you look at Dhoby Ghaut and Tanjong Pagar Xchange, commuters can just walk through without having a look at the shops,” Mr Ng said.

“At CityLink Mall, to get from point A to point B, invariably we have to pass by the shops. That’s where I think that rents will see a difference,” Mr Ng added.

Source : Today – 13 Oct 2010