Why CapitaMall Trust is catering to necessity shopping
73.1% of its malls' gross revenue came from this market segment in what is clearly a defensive strategy versus the downturn.
Alongside this focus on necessity shopping, CapitaMall Trust also seems to have a Midas touch when it comes to revamping flailing property. Maybank Kim Eng points to how it has turned around the Bugis+ mall (previously Iluma) which is now seeing encouraging footfall traffic.
Here's more from Maybank Kim Eng:
Bugis+ opens its doors. We visited Bugis+ a week after its major anchor tenant UNIQLO launched its duplex flagship store, which is UNIQLO’s first street-level store in Singapore. We were encouraged by the footfall even though AEI works are not fully complete and we believe that CapitaMall Trust (CMT) will be able to bring Bugis+ up to its desired level of operation as projected.
Synergies evident between Bugis Junction and Bugis+. With UNIQLO’s 20,000-sq-ft shop as the main anchor, Bugis+ will be an extension of Bugis Junction, drawing the young and trendy that makes up its targeted captive market. By July, the bulk of the AEI works should be complete, and other offerings like the cineplex will help to attract even more shoppers when they open. Management estimates the yield-on-cost post AEI will be 5.8%, taking it much closer to Bugis Junction and vindicating its acquisition.
Portfolio still substantially catered to necessity shopping. Even though Bugis+ caters more towards lifestyle discretionary spending, CMT’s portfolio of malls remains predominantly catered to necessity shopping, accounting for 73.1% of gross revenue as at end-2011. Given that necessity shopping is less vulnerable to an economic downturn, CMT’s defensive nature will shine through amid the global uncertainties. We also expect the incremental contributions from Clarke Quay and Atrium@Orchard upon completion of their AEIs to support DPU growth.
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