As the retail scene continues to face increased pressure from e-commerce and online players, landlords are being forced to adapt their strategies to a new reality, juggling more flexible and creative leasing terms with retaining consumers.
Retailers now have the ability to push for more favourable leasing terms around how they occupy a space, how much space they’re taking up and their preferences in how they for that space.
Just recently, furniture retailer Courts Asia confirmed they had changed their strategy to build market share to include the option of opening pop-up stores with short-term leases before deciding whether they could convert them into permanent stores as a way to build market share.
“Landlords have to provide more flexibility around how rental structures are set up instead of falling back on standard leases, which are usually a combination of monthly rent and a percentage of sales,” says Holly Rome, Director of Retail Leasing at JLL. “Instead of having empty spaces in malls, landlords need to incentivise taking up space and appeal to new retailers.”
Banking on food and entertainment
Besides changing lease terms, landlords are also banking on experiential offerings as a means of keeping their malls relevant.
Hong Kong’s APM Malls is planning to create a 3,000 square foot digital basketball court as well as offering virtual reality boxing and holding an exhibition of rare trainers in a bid to attract younger crowds, while Merlin Entertainment is opening four more Legoland Centres in malls across Australia after the successful launch of its first at Chadstone, Melbourne, last October.
Over in Singapore, landlords are allocating more space to F&B tenants as the smaller retail scene in the city-state struggles to keep up. According to analysis from JLL, F&B space in Singapore malls stands at over 30 percent, compared with 23 percent in Hong Kong and 10 to 15 percent in Europe.
JLL’s latest Retail Index also highlighted that F&B operators in Jakarta and Manila were the most active segment in the first quarter of this year, while malls in Chinese cities continue to ramp up their F&B operations as some fashion retailers shy away from the market.
“Experience-oriented retail such as eating out and entertainment is something that is hard to replicate online so landlords across Asia Pacific are increasingly adjusting their tenant mix towards a greater presence of F&B to draw foot traffic,” sums up Lee Fong from JLL’s Research team in Asia Pacific.
Director of Retail Leasing at JLL