Retail's saving grace: Singapore malls embrace activity-based tenants

Gyms, health centers and virtual reality arcades are estimated to occupy 50% of the island's retail mix.

With e-commerce sales in Singapore expected to hit $10b by 2020, embattled mall operators are fighting back by increasingly making room for service and lifestyle tenants whose shopping experiences cannot be simply replicated from within a screen. 

In recent years, malls across the island have witnessed a rapid proliferation of activity-based tenants including health and fitness hubs, culinary centers, crafts workshops and virtual reality arcades with Savills Singapore estimating that activity-based tenants could easily occupy around 50% of a mall’s floor area with less than 300,000 sqft of net lettable area.

Also read: DIY or die: Singapore's brick and mortars turn to experiential shopping to survive

Malls that have prominently adopted a list of activity-based tenants in their retail mix include Velocity@Novena Square whose big-time sports tenants include Adidas and Asics as well as OUE Downtown with tenants on the block including Absolute Cycle, Boulder Movement, Haus Athletics, Still Boxing, and Sweatbox Yoga, according to Ong Choon Fah, CEO and head of research and consulting of Edmund Tie & Company.

On the other hand, United Square Shopping Mall in 101 Thomson Road is positioning itself as a kid’s learning hub through its spacious nursing rooms, colour-themed levels and detailed play features, noted Alan Cheong, senior director, research consultancy at Savills Singapore.

The trend towards activity-based retail is perhaps more prominent in prime shopping belts such as when amusement center Fat Cat Arcade recently opened in Bedok Djitsun Mall while Korean carom billiards bar Thirsty4Balls opened at The Cathay along Orchard Road, according to an earlier report by Colliers International.

“Experience-based tenants are valuable for malls,” according to Simon Ogilvie, executive chairman of Tomorrow Entertainment who brought virtual reality social gaming space Zero Latency to Suntec Singapore last November.

Banking on their premium entertainment experience, Zero Latency enables gamers to roam freely across a 2,200 sq ft space to survive in alternative worlds including one dominated by a horde of zombies. Since its launch late last year, Ogilvie claims that the store has seen over 18,000 customers and counting. 

The strong market response to activity-based tenants could be analysed in stark contrast to embattled fashion retailers who have been forced to exit the market under the weight of heating competition. Within this year alone, Singapore has seen the consecutive exits of clothing brand Gap who closed down all its stores in Suntec City and VivoCity along with Banana Republic who waved the white flag for its Paragon and MBS outlets. American Eagle Outfitters also shuttered down its Suntec City and VivoCity outlets to add to the growing list of brands brought to its knees by online retail. 

Also read: Chart of the Day: Online shopping to grow 13.6% over 2018 to 2022

It comes as no surprise that malls across the world have been steadily shunning the outdated model of cash in exchange for goods and deploying more engaging retail concepts in an effort to enhance the shopping experience, observed Ong. 

“[T]raditional retail malls are under pressure to attract and retain sustained foot traffic, and Location Based Entertainment (LBE) venues are filling that need,” echoed Ogilvie. 

In addition to experiential gaming, landlords are also leasing to a number of service and lifestyle shops like medical and dental clinics, nail and hair salons, beauty treatment space, events stores and pop-up shops in an effort to refresh tenant mix and lure footfall, observed Ong. 

“Over the years, malls have also transformed from a shopping area to a third place, where people hang out and socialize,” she added. “The constant change of space use in the mall also incentivises shoppers to return to the mall on a more frequent basis to check out the new offerings and experiences.”

Also read: Retailers try virtual make-up screens and in-restaurant games to counter online shopping

The Orchard Road Business Association (ORBA) which represents the many business interests along the prime retail belt, also launched the Work Great on A Great Street campaign through the partnership of health and fitness partners like Amore Fitness, New Vogue Dance Group, KpopX and ABC Cooking Studio Singapore to deliver health and fitness programmes in the precinct.

“Through this initiative, Singaporeans will come to see Orchard Road, not as just a great shopping destination, but also a lifestyle hub for health and wellness,” Mark Shaw, chairman of ORBA said in a statement.

However, Cheong notes that the trend may not necessarily be limited in Orchard Road. "I would think that activity based tenants thrive in non-Orchard Road malls. The rents in prime Orchard Road malls are too high to afford any meaningful climbdown to accommodate activity based tenants. Thus, the conditions for an activity based theme to work will be that the malls should be located outside or at the fringe of Orchard road and they are either small to mid-sized, say not more than 300,000 sq ft."

Bright spots
In addition to activity-based retailing, analysts observed another growth engine of Singapore retail in the F&B segment which continues to account for a large part of tenant sales. Against the growing affluence of residents and cultural importance of food, F&B businesses will continue to be one of the sector's bright spots. 

“Singapore is known for being a food city and many landlords of shopping malls are bringing in a variety of F&B tenants to attract consumers,” Ong explained. "Landlords will attract more new-to-market brands so shopping malls will be able to differentiate themselves from others."

Also read: F&B sales hit $677m in June

This is evident in recent F&B expansions including Filipino french fries stall Potato Corner which launched its first Singapore branch at 313@Somerset and Chinese fast-food company Liang Sandwich Bar who has unveiled plans to open outlets in VivoCity and Raffles City.

"Other F&B chains are expanding their business in Singapore to cater to the many food preferences of residents. This can be seen in the case of Tiong Bahru Bakery, which opened its fourth outlet at Holland Village. Additionally, other F&B chains are returning to Singapore. For instance, Miso ramen noodle chain, Bishamon, will be resuming its operations at Suntec City after a four-year break. American fast food eatery, A&W, will also be returning to Singapore," observed Ong. 

On his part, Cheong estimates that F&B segments could take up to 40% of spaces for malls competed two to three decades ago whilst relatively newer retails paces can accommodate around 35% to 38% of such tenants. Retail podiums with sizes at or below 100,000 sq ft of net lettable area that are located in Grade A CBD offices can house up to 90% for F&B purposes.

Moving forward, Singapore landlords are expected to focus on activity-based and F&B tenants in the near future to curate the entire mall experience, added Ong. 

Cheong echoed the sentiment. "It is sustainable for the foreseeable future because landlords and operators here have no practical alternative. The novelty may wear off, but the lingering fear that a normally decked out retail mall would suffer a quick death may steer landlords and operators back to the activity based concept."

Photo from Zero Latency Singapore's Facebook page