Asked on 28 May 2019
This is actually a pretty interesting question! Especially the idea on whether this is a bubble or not.
I’m personally really curious about this topic as well due to my interest in REITs, and Retail REITs to be specific. (personally pretty heavily vested)
Another reason is because I love shopping and eating at these malls and great to see how the malls are doing, whether it’s bustling or a dead town.
And in fact, you’ve brought up a very good point. With more and newer shopping malls like Jewel Changi spouting up, you will probably wonder who are filling up these malls. In the past 5 years, most analysts predicted the rise of eCommerce as a threat to the retail malls in Singapore, however, that was not to be the case.
In summary, some factors I would consider when it comes to understanding whether the trend for retail:
If you are keen to read on more, I have a few facts here which you can dissect.
Fact 1: A rising of consumer spending in Singapore
Source: TradingEconomics, numbers are in SGD Million
“Consumer Spending in Singapore increased to 43858.50 SGD Million in the first quarter of 2019 from 43647.60 SGD Million in the fourth quarter of 2018.
Fact 2: A growing Singapore population
“Total population growth in 2018 was 0.5% (compared to 0.1% in the previous year). Resident growth has remained stable since 2012.”
If you combine the two facts together, you get a population with rising affluence and spending more money over a period of time.
The main threat of Retail REITs in Singapore:
In fact, I was at the recent CMT (CapitaMall Trust) AGM 2019 and the RWS AGM so I have found some trends which I will share more below.
And it was mentioned by the CEO of CMT, Tony Tan (familiar name, I know), that the real threat of Retail REITs in Singapore is over-crowding of shopping malls and choices fighting for the consumer dollar spend, rather than the threat of eCommerce.
Curious to know what malls do these REITs own?
The older two are CMT and FCT, which are the two main retail REITs in town, with others like Lendlease which just IPO-ed.
CapitaMall Trust (CMT)
Frasers Centerpoint Trust (FCT)
Lendlease Trust (NEW)