SINGAPORE (Nikkei Markets) - More visitors are flocking to Singapore's malls but the increase has not resulted in higher sales, quarterly results from the city-state's real estate investment trusts show.
While the landlords managed to raise rents slightly during the period, they were cautious about the outlook with the bigger REITs pointing to the flagging economy and government measures to reduce the dependence on foreign workers in the service industry as reasons.
Tony Tan, CEO of the management company for CapitaLand Mall Trust, Singapore's biggest retail landlord with 15 properties, said competition could also intensify this year as new retail space becomes available.
According to an earnings report released Wednesday, CapitaLand Mall Trust's tenant sales per square foot fell 0.4% in the first quarter from a year ago, hurt by sharp drops in sales of information technology and communications products, home furnishing and music and video. This was despite a 2% increase in the number of people visiting its malls.
Over at VivoCity, Singapore's largest mall owned by Mapletree Commercial Trust, shopper traffic rose 0.5% in the year ended March, but tenant sales fell 2.0%, partly due to the progressive shutdown of a large hypermarket and the closure of some other shops to make way for a library.
Frasers Centrepoint Trust, another large landlord, said shopper traffic rose 2.4% during the quarter ended March. Tenant sales, however, declined 1.3% in the three months to February.
"Some retailers, particularly those in the F&B and service sectors, are holding off expansion plans to prepare for further tightening of foreign labor quotas," Mapletree Commercial Trust said at a briefing.
Singapore's gross domestic product expanded by 1.3% in the first quarter from a year ago, according to government flash estimates, slowing from 1.9% in the final quarter of 2018. The growth was the slowest since the global financial crisis ended in 2009.
In the budget announced in February, Singapore decided to lower the ratio of foreign workers that the service industry can employ to 35% by January 2021 from the current 40%.
The move triggered an outcry from many business owners, especially in the food and beverage industry, who said it would add to the problems posed by high rents and scarcity of labor.
Based on data from the Department of Statistics, retail sales, excluding automobiles, decreased by 10.7% year on year in February. Restaurants, fast food outlets and other eating places saw receipts fall 2.3%.
Despite the slowdown in the retail sales, landlords reported a rise in revenue for the quarter, indicating higher rents.
At CapitaLand Mall Trust, gross revenue rose 10% to 192.7 million Singapore dollars ($141.8 million) for the quarter, after it acquired the balance 70% interest in Westgate mall in western Singapore. On a comparable mall basis, gross revenue rose by 1.2%.
VivoCity saw quarterly revenue grow 4.9% on year while Frasers Centrepoint posted a 2.3% rise in the measure.