Now the dust has settled and strata retail malls are completed, the question is where are the tenants?
Some of these malls are not even half full even a year after completion. The soft retail market is one reason. Lack of a coherent marketing strategy due to fragmented ownership is another. The other reason is due to small unit sizes.
In a bid to keep quantum affordable, developers have created spaces as small as 100 sq ft. Very rarely do they have units larger than 1,000 sq ft for sale. Not many individual investors have a few million dollars to spare.
These small spaces have resulted in a mismatch between demand and supply. In a retail mall managed by a developer, if a tenant needs a larger space, the developer can knock down the dividing wall to create a larger space. But in a strata mall, the tenant will have to deal with different owners to get the size he wants. Different owners will want different rents for their units. This is one reason why a strata mall seldom attract an anchor tenant due to the difficulty of getting a large unit.
Which trade can an investor target if he has a strata unit?
Based on my experience in marketing retail units, these are the possible trades. It is not exhaustive but it is a guide.
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Size (sq ft)
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Possible Trade
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Examples
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100 – 200
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Money changer, barber, mani-pedi, bubble tea
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K-Cuts, EC House, Koi, Gong Cha
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201 – 500
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Convenience shop, café, maid agency, bakery, salon, spa, education
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Ya Kun, Toast Box, 7-11, Cheers
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501 – 750
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F&B, apparel, renovation
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Starbucks, Coffee Bean, Café Bene
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> 750
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F&B
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Various
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The best bets for these strata units are likely to be services like barber, maid agency, education and renovation. But their ability to pay high rental is limited. Strata retail malls do not have high footfall unlike those managed by a developer or REIT. Hence trades with very thin profit margins may not be able to survive in a strata mall.
Do check around to verify the rents quoted by marketing agents. REITs are good sources of rental information as they will give indications of passing rents in their malls.
Good luck in securing a tenant for your unit!
