Move over, oldies: New malls snatch shoppers from established retail REITs

Are the youngsters poised for a takeover?

New malls are giving the older retail REITs a run for their money. Retail REITs generally reported a decline in shopper traffic in 1Q14, thanks mostly to the opening of new malls.

According to a report by UOB Kay Hian, shopper traffic is impacted by the opening of several new retail centers in Jurong East, Bedok, and Orchard. Shopper traffic and tenant sales in older REITs slipped, while those in the new malls spiked.

Shopper traffic declined 1.9% yoy for CapitaMall Trust (CMT) malls, while tenant sales fell 4% yoy in 1Q14. For FCT malls, shopper traffic dipped by 7.6% yoy largely due to ongoing upgrading at Bedok Point.

Meanwhile, Mapletree Commercial Trust’s Vivocity mall reported a 1.4% growth in shopper traffic for the year ended 31 March. SPH REIT’s Clementi Mall also reported a 2.7% yoy growth in shopper traffic for 1H14.

“We anticipate that the impact of the new malls will stabilise after six months and as older malls adjust their tenant mix to respond to the competition,” noted UOB’s report.

Here’s more from UOB:

In response to competition in Jurong East, CMT is embarking on the second phase of upgrading at IMM to include more outlet stores while also undertaking an AEI at JCube, which was recently upgraded in 2012, to strengthen its position as a leisure- and entertainment-focused mall.

FCT has also secured new tenants at Bedok Point, increasing the mall’s focus towards F&B and learning/education, in response to competition from Bedok Mall.

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