The amount of retail space in the tier-1 cities of Singapore and Kuala Lumpur is high at 8 to 12 sq ft per capita, but overall demand could fall short of current supply as more consumers patronise online retailers, according to the latest report from JLL entitled “The Fourth Industrial Revolution: The Impact on Real Estate in Southeast Asia.”
In the city-state, e-commerce is becoming more popular, with more people buying from the web items such as clothing/shoes (63 percent), household or electronic goods (18 percent), groceries (15 percent), and books/magazines (8 percent).
The sharpest increase was seen in groceries and household or electronic goods, with online sales rising by 65 percent and 75 percent respectively over the past two years.
Although e-commerce sites compete with brick-and-mortar stores for sales, online retailers could also drive demand for retail space. For example, Zalora and Reebonz have established ‘pop-up’ stores for a few months in malls at Singapore and Malaysia to showcase their products and boost awareness, said the report.
Hence, the property consultancy is urging mall owners to adopt a multi-channel to retain their competitive edge by incorporating lifestyle events and experiences, incorporate online savvy retailers, and capture more online retailers.
The need to cater to such tenants is important as supermarkets and department stores, which occupy 15 to 25 percent of the retail space in tier-1 cities, are expected to downsize.
“We expect a 20 to 30 percent reduction in retail spaces by 2020 as more sales of these non-experiential goods go online. Asset owners will need to source for alternative tenants or uses for space,” said JLL’s national director for Advisory & Research, Capital Markets, Regina Lim.
Despite the expected lower space requirement of supermarkets and department stores, most shoppers would continue to visit shopping malls in Singapore for purchases costing above S$500, as 71 percent of online purchases there are below that amount compared to 60 percent in 2012.
“Retail malls, therefore, should consider shifting their tenant mix to include more upmarket brands which are less likely to be bought online,” she added.