1 Key Metric to Watch for CapitaLand Mall Trust

CapitaLand Mall Trust (SGX: C38U) is an owner of retail malls in Singapore. It is also the largest listed real estate investment trust (REIT) in Singapore.

But mere size alone does not guarantee that shoppers will keep coming back to its portfolio of malls. To ensure a steady stream of shoppers, the REIT has to keep itself plugged into the latest consumer trends.

One retail trend is online shopping.

In my view, shopping online has three major benefits. One, there may be a wider variety of products. Second, the cost of similar products may be cheaper online. Finally, there is the convenience of having items delivered to one’s doorstep. All three benefits could led to lower shopper traffic to retail malls in general and thus potentially pressure CapitaLand Mall Trust.

The big prize

In 2015, CapitaLand Mall Trust’s retail malls had attracted a significant amount of foot traffic. The REIT noted the following in its latest annual report:

“In 2015, our malls attracted shopper traffic of about 348.0 million. The consistently high shopper traffic over the years is due to the strategic locations of our malls, which are connected to or near transportation hubs in large population catchment areas, as well as our proactive asset management.”

For perspective on CapitaLand Mall Trust’s shopper traffic number, Singapore’s population is currently around 5.6 million people. Keeping a mall busy is generally good for its tenants as it could lead to more business. More business for a mall’s tenants may then lead to higher rent for the mall’s owner down the road.

CapitaLand Mall Trust saw its tenants’ sales per square foot and shopper traffic increase by 5.3% and 4.9%, respectively, in 2015. Shopper traffic could be one key metric to watch for the REIT.

Protecting the house

In a previous article, I had highlighted two ways that CapitaLand Mall Trust is using to protect and enhance its shopper traffic. The REIT’s latest 2015 annual report revealed another novel initiative that the REIT is employing:

“An example is Singapore’s first on-site centralised dishwashing facility at IMM Building. Operated by GreatSolutions, this on-site facility helps our food and beverage (F&B) tenants who are facing a tight labour situation.

It allows F&B operators to improve productivity by deploying labour and freeing up dishwashing areas for retail space. Compared with offsite dishwashing facilities, this on-site solution reduces crockery breakage during transportation, and enables more frequent deliveries to F&B outlets.”

Centralised dishwashing is one way that may make IMM Mall more attractive for food and beverage (F&B) tenants. Eating out is one activity that may be less disrupted by ecommerce. Helping out its F&B tenants could thus be in the REIT’s favour.

Foolish takeaway

In my view, online shopping is here to stay and will likely take up a bigger share of the retail market over time. It is up to Singapore malls to decide whether the trend is a threat or an opportunity.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong doesn’t own shares in any companies mentioned.