Ah, to be a suburban mall owner

PRIME EXAMPLE: The most profitable malls here tend to be in the suburbs. Bishan's Junction 8 made a net property income of $157 per sq ft last year.


    Mar 25, 2014

    Ah, to be a suburban mall owner

    SOMEONE once told me he wanted to come back in his next life as a suburban mall owner. I'm not sure what kind of karma he would have to accumulate in his current life to be bestowed with that good fortune in the next, but it certainly sounds like an agreeable proposition.

    And why not? A comparison of the profitability of Singapore malls shows that the most profitable tend to be located in suburban centres like Tampines, Bishan and Yishun - suburban in Singapore being defined as a location not within the Central Business District.

    A prime example would be Bishan's Junction 8. Around a 1km radius are Housing Board flats, landed property, condos, industrial buildings, well-known schools like Raffles Institution, a mosque, a church, a stadium and a library.

    There are some eateries and shops around it. Otherwise, the mall has no competition in sight - the nearest mall is probably AMK Hub.

    Land around Bishan is mostly built up. No alternative malls should be springing up any time soon.

    Junction 8 thus has a captive audience of the estimated 65,000 HDB dwellers living nearby, not including those living in private property and the students, workers and other people using the various amenities nearby.

    Bishan is also accessible. Bishan MRT station, beside Junction 8, is an interchange for the North-South and Circle lines. Bishan is also a 10-minute train ride from Orchard, and has a bus interchange too.

    By the way, shopper traffic in 2012 was 29.2 million - the third highest among CapitaMall Trust malls after Bugis Junction and Raffles City. This translates to roughly 80,000 people a day.

    A tenant that leaves is easily replaced, looking at Junction 8's occupancy history. It was fully occupied for eight of 10 years from 2003 to 2012, through Sars and the global financial crisis, with the only exceptions being 2004 (99.8 per cent occupancy) and 2012 (99.6 per cent).

    This slipped to 99.4 per cent last year, perhaps reflecting a tougher retail environment as costs rise.

    By having a tenant mix squarely in the mass market segment, suburban malls ensure a constant stream of visitors. The tenant mix in a place like Junction 8 will give a rough idea of the magic formula required.

    It has mass market fashion chains Cotton On, G2000 and Giordano; Chinese food like Din Tai Fung and Crystal Jade; DBS Bank; a Food Junction food court; a Golden Village cinema; fast-food chains McDonald's, KFC, MOS Burger and Subway; telco shops SingTel, StarHub and M1; a Coffee Bean & Tea Leaf; Best Denki and Challenger for electronics; a Cristofori Music School and an NTUC FairPrice supermarket in the basement.

    Suburban malls do not need unique, quirky boutiques and fine dining restaurants to be profitable. By being the only mall around and catering to the basic needs of people living nearby, they will do just fine.

    Junction 8 has one of the highest net property income per square foot of net lettable area among malls in Singapore's listed Reits. Based on the latest figures, the mall generated a net property income of $157 per sq ft last year.

    This is akin to renting out a 1,000 sq ft condominium and enjoying $157,000 in profit a year after the deduction of maintenance expenses and property management fees, before mortgage payments and other costs.

    This works out to takings of roughly $13,000 a month. Do you get $13,000 a month from renting out your condo?

    No? Start working on that karma.