DEPARTMENT stores like Robinson’s and Isetan may have been the retail giants of yesteryear but they need to reinvent themselves in order to stay relevant to consumers and mall owners.
If their sales figures cannot keep up with rising rents, then they must find some way to become more productive, said CapitaLand Retail chief executive Pua Seck Guan yesterday.
He said department stores pay far less in rentals than speciality stores, which have shot up in number and popularity in recent years.
Department stores generally pay less rent on a per sq ft (psf) basis as they take up large spaces.
They are charged about $5 psf to $7 psf per month, Mr Pua said. Yet smaller fashion boutiques can pay over $20 psf on average.
Mr Pua, who was speaking on the sidelines of the CapitaLand International Advisory Forum, was responding to comments from Robinson chief executive John Cheston earlier this week.
Mr Cheston had told The Straits Times that department stores are now facing more challenges as new malls shun them in favour of smaller speciality stores paying higher rents.
He said department stores are being squeezed by landlords for higher rents even though they cannot afford to pay them.
CapitaLand gave its side of the story yesterday. The company - one of Singapore’s biggest mall landlords, with Plaza Singapura and Tampines Mall under its belt - had said it will not put a department store in its newest mall, Ion Orchard.
Mr Pua said this was because mall owners have their own problems, as land and property prices soar.
CapitaLand was ‘prepared to pay above $1 billion for the Ion Orchard site’, he said. But he added that at that level, ‘we cannot afford to have a department store pay us $5 psf to $7 psf’ monthly. This ‘cannot match the land value’.
‘Even supermarkets and food courts today are getting more productive and paying more in rents,’ he said. They easily rack up sales of $100 psf - double that of department stores - and pay double the rent, too, Mr Pua added.
Department stores have become less relevant especially in suburban malls like Tampines Mall and Junction 8, he said.
‘I would argue that even if I shut down the anchor tenants, I would still have the same level of traffic’ in those malls - up to two million customers a month.
But he was quick to praise department stores like Robinson’s for adapting quickly by bagging new brands and opening stores.
Indeed, Macquarie Meag Prime Reit, which owns Wisma Atria and Ngee Ann City, said the department stores in its malls have been an important pillar.
The lasting popularity of Isetan and Takashimaya is a testament to their solid branding and constant reinvention of their extensive product offerings, it said.