retailers to shine on – and at a price per square metre that retailers have never quit complaining about since the ink dried on the very first lease. Yes, retail property can be perceived as boring and a pain in the neck, but it’s necessary, it’s back, Covid-19 is done, and we’d better get used to rent increases again. The most recent trends from the biggest shopping-centre companies in Southeast Asia strongly suggest that retail property is clicking again after three years in the doldrums. It shouldn’t come as a big surprise, since the setback that started in March 2020 and dragged on for two years, and in some places for the best part of three, was always bound to set a low bar from which 2023 would start to look good. That expectation is now being borne out by the growth of foot traffic, sales and occupancy at shopping centres and Main Streets across the region, accompanied by upward pressure on rents. The return of retail property is also being borne out by another metric that has gone largely unnoticed in the continued spruiking of digital commerce across the region, which is that online penetration has levelled off after a three-year growth spurt, temporarily to be sure, but the fears – shared by retailers with large store fleets and their landlords – that Covid might have initiated a more permanent kind of bloodbath at the hands of steeply rising adoption of e-commerce have now dissipated. Singapore is a good case in point. In April, e-commerce was 12.0 per cent of retail sales, official government figures from Singstat show, down from 13.0 per cent in March and down from 14.4 per cent in April last year. Recall that except for the spike in April-June 2020, the peak was 17.7 per cent in October 2021, so an important thing these numbers are telling you is that physical stores have stopped some of the leakage that was caused by government Covid countermeasures, specifically the shutting down or restricting of the business of retail property while giving technology companies an effective free rein. It was a neat trick as industry policy goes: usually governments encourage their favoured industry sectors with subsidies and tax breaks; in this instance they didn’t need to spend a penny, instead simply telling some of the biggest ‘old economy’ businesses to cease or curb operations until further notice. Even the shopping-centre companies and retail chains that had the most to lose didn’t say a word in anger. For the politicians overseeing panicked populations, it was so easy it was almost laughable. So e-commerce penetration temporarily soared, across Asia and the world. A word of caution here though: you won’t get a consistent number for a metric like this, and the forecasts will be all over the place. For example, while the Singstat number for Singapore in April is 12 per cent, McKinsey put the number at 30 per cent in a recent commentary. Meanwhile, CBRE came in at closer to 17 per cent. You have to wonder what’s going on in the machinations behind some of these numbers. What shopping centre companies are telling us To see at a glance the revival of retail property around Southeast Asia, it’s useful to look at recent data on rental revenue growth from some of the largest retail real-estate companies. Let’s take a look at four big ones, from the Philippines, Vietnam, Thailand and Singapore. SM Prime – the Philippines SM Prime operates 82 malls in the Philippines and seven in China, and also has 22 mixed-use projects with sizable retail components – half of them in metropolitan Manila and half in the provinces – called ‘lifestyle cities’, many of which are former US military bases like Subic Bay. These mixed-use projects can be very large and incorporate a number of integrated uses. For example, the Mall of Asia complex in Pasay City, Manila, has retail, offices, residential, a convention centre and an indoor sports arena. The company’s malls in the Philippines alone have almost 20,000 tenants, so SM Prime’s leasing staff are never idle. The company also has a formidable landbank for expansion, of which 340 hectares have been designated for retail. In its most recent reporting quarter, net income grew 22 per cent, year on year, on the back of Philippine mall revenue growth of 88 per cent, year over year. Rental revenue increased by 72 per cent, year over year. Not too shabby. The company is saying that foot traffic is on the mend again and it is spilling over into sales growth. Vincom This is the dominant mall developer in Vietnam. In the first quarter of 2023, rents on a year-over-year basis rose by 36 per cent in downtown Hanoi and 45 per cent in downtown Ho Chi Minh City. Vincom’s leasing revenue was up 54 per cent, year over year. Foot traffic has returned almost to the level of 2019. Central Retail Apart from being one of the top three retailers in Thailand, with multiple brands across a diverse spectrum of categories, Central operates 27 malls in 25 provinces, making it arguably the most important mall operator in the country. It also operates 39 malls under the Go! Brand in Vietnam, as well as hypermarkets, supermarkets and specialty hard goods stores there. For the whole portfolio, rental and service income was up 28 per cent in the first quarter, compared with a year ago, and in Vietnam the same metric was up 41 per cent. Again, not shabby at all. CapitaLand Singapore’s retail REIT CapitaLand enjoyed double-digit percentage growth in retail sales per square metre at its malls in the first quarter, accompanied by concomitant growth in foot traffic. CapitaLand is adding space for in-demand categories like sporting goods, health and beauty, and food and beverage. Average leasing spreads (in essence, the wedge between incoming and outgoing rents), was positive 6 per cent. Rental revenue was up slightly but as leases turn over, the improved leasing spread will diffuse across more of the tenant space, causing total leasing revenue to grow more quickly. You can’t keep retail property down Despite all the marketing hype, changes in retail are evolutionary, not revolutionary, and changes in retail property are pretty glacial. There are reasons why malls are slow coaches, of course. Shopping mall development requires enormous upfront investment, compared with a store opening, and the basic design, configuration and functionality have to be fixed months and even years before the ribbon is cut. Also, changing a mall later on, for example with a renovation, is a long process with considerable investment. And there are other reasons why malls take longer to change; for example, because leases are usually written for terms that last years, so it is difficult to adapt to changes in the market in real time. But as much as governments used Covid as cover to put the retail property companies in their place and accelerate the development of technology-led ‘solutions’, humans are human. They are swarming back to the stores and the malls. Retail property is back and the numbers from the big companies prove it.