The
effectiveness of the anchor tenant model is under doubt, amid the
ongoing rental dispute between landlord of Ngee Ann City and its
anchor tenant department store Takashimaya
SINGAPORE: Anchor tenants – like major department stores and big
name brands – have long been used to pull the crowds into shopping
malls.
But against a more challenging retail landscape, industry
analysts told Channel NewsAsia that this strategy may no longer
have the same draw.
The landlord-anchor tenant relationship is also coming under
spotlight, amid an ongoing rental dispute between landlord Ngee Ann
Development and department store Takashimaya, its long-time anchor
tenant at Ngee Ann City shopping centre.
Last week, both parties – which were in a business partnership
for over 20 years – found themselves in court over a rental
agreement.
Ngee Ann City's landlord, Ngee Ann Development, had proposed to
raise the department store's rent to S$19.83 per square foot, up
from S$8.78 per square foot. This was in 2013, after Takashimaya
renewed its lease for another 10 years.
While it's possible for anchor tenants to part ways following
private negotiations, one property expert Channel NewsAsia spoke to
said it is unlikely to happen in this case.
"The brand Takashimaya has stayed very well and long-lasting
because of its strong customer base and international standing. And
it's positioning where Ngee Ann City is - is excellent, and you
can't find a replacement of a location like that,” said Chestertons
Managing Director Donald Han.
“Over the years, the Ngee Ann City location has built itself as
the premier shopping spot along the Orchard Road belt… Because of
that it's a symbiotic relationship that both want each other to
co-exist."
The anchor tenant model is a traditional one used by landlords,
where the anchor tenant's brand is meant to draw crowds in and set
the tone for that mall.
"Wherever they go, footfall traffic will follow. They also bring
tenants, which are related to that kind of business, to surround
them. So it creates an easier path for landlords to attract other
tenants who want to be near the anchor tenant," said Mr Han.
But one size may no longer fit all.
"For malls that are less well-located, are currently having
problems retaining their tenants, or experiencing weak shopper
traffic - I believe they will still benefit from having a good
anchor. But having said that, having an anchor for the sake of it
is really not the answer,” said Sulian Tan-Wijaya, Executive
Director, Retail and Lifestyle at Savills Singapore.
“Because if it's not a strong anchor who can bring in the
traffic, it doesn't make financial sense for the mall - because
they pay very low rents."
Ms Tan-Wijaya added that some malls that lose anchor tenants may
not replace them, choosing instead to fill their retail space with
a more adventurous mix of tenants. This could increase rental
revenue.
Malls like Ion Orchard, for example, have eschewed the model and
opted not to have an anchor tenant. And it has appeared to work in
its favour, helped by the mall's central location and proximity to
an MRT station.
Newer malls like Somerset 313, Mandarin Gallery and Scotts
Square also do not have anchor tenants due to their smaller
size.
- CNA/ll