(Sept 2): Retailers appear to be exiting local shopping malls in droves, but the impact on the real estate investment trusts is probably limited. First, Giant hypermarket exited VivoCity earlier this year. Mapletree Commercial Trust (MCT) said in its 4QFY2019 (it has a March year-end) results announcement that it would be changing hypermarket operators at the mall. Giant would be replaced by Fairprice Xtra. Giant also exited Turf City in early August, to be replaced by HAOmart, and Giant at 10 Mile Junction was replaced by Sheng Siong. Elsewhere, Giant is a mini-anchor tenant at IMM, which belongs to CapitaLand Mall Trust (CMT), and at Suntec City, part of Suntec Real Estate Investment Trust

A Suntec REIT spokeswoman says
Giant’s lease at Suntec City continues to run. Cold Storage Holdings, Giant’s immediate parent, leases 46,000 sq ft of net lettable area at Suntec REIT, most of which is occupied by Giant. Neither is Giant a significant tenant at CMT, being present only in IMM, among its 15 properties. 

Giant is owned by Dairy Farm International Holdings. In its FY2018 annual report, the company said following a strategic review that a US$50 million ($69.4 million) impairment was made for Giant. “In Southeast Asia, our core issue rests within our Giant brand and particularly hypermarkets in Malaysia, Indonesia and Singapore. We have significantly underinvested in these hypermarkets in the past and they now need a course correction to reshape and resize our offering, to ensure it is fit… to meet the demands of modern-day consumers and keep pace with the rising middle
class,” Dairy Farm said. 

Metro department store — owned by Metro Holdings — is set to vacate The Centrepoint, a property owned by Frasers Property, and its space will be replaced by Decathlon. Metro is also a mini anchor at Paragon, the largest asset in SPH REIT.

High rents and more stringent regulations on tobacco and liquor also factors that drive away retailers. 

On Aug 27, DFS Group, part-owned by Louis Vuitton, announced that it did not bid to renew its concession, which expires in June 2020, at Changi Airport. DFS is not closing all its shops at once, though. “Our plan is to ensure a seamless transition as much as possible so that passengers are not inconvenienced. We don’t expect that all 18 stores will be closed at the same time,” says a Changi Airport Group (CAG) spokesman. The Moodie Davitt Report says Lotte Duty Free and The Shilla Duty Free of South Korea and Gebr Heinemann of Germany are bidding for the tobacco and liquor concessions. Shilla Duty Free also operates the cosmetics and perfumes duty-free concessions at Changi Airport.

During the budget announcement in February this year, Deputy Prime Minister and Minister for Finance Heng Swee Kiat announced a reduction in the duty-free alcohol allowance for returning travellers, from three to two litres, to be implemented from April. From July next year, tobacco products sold in Singapore must have plain packaging and enlarged graphic health warnings. Moodie Davitt attributes DFS Group’s departure from Changi Airport to the lower allowances. 

According to CAG’s FY2018 annual report, concession sales rose 10% y-o-y to $2.5 billion. In the same period, airport concessions and rental income of $1.3 billion made up 50% of CAG’s revenue of $2.6 billion. CAG owns 51% of Jewel Changi Airport. 

Changi Airport is not the first high-profile airport concession that DFS Group has exited. In 2017, DFS Group lost out in its bid to renew its concession at Hong Kong International Airport, to a China Duty Free Group and Lagardere Travel Retail joint venture.

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