Why some malls thrive and others don't? What investors should look out for

What happened?

In Singapore, mall performance is often reduced to a few headline numbers. 

Rental growth, occupancy rates, footfall. When these figures rise, a mall is seen as successful. When they fall, concerns quickly surface.

But what happens when those numbers stop telling the full story?

In this Beansprout podcast episode, we sit down with Ervin Yeo, CEO of Commercial Management & Group Chief Strategy Officer at CapitaLand Investment, to unpack the real story behind Singapore’s retail landscape - beyond headlines about rising rents, struggling F&B businesses, and mall performance.

Drawing from decades of operating Singapore’s most iconic malls, Ervin breaks down what actually drives mall success, how tenant partnerships work, and what investors often misunderstand when analysing retail REITs.

This episode offers a rare behind-the-scenes look into how malls are really run - and what shoppers, tenants, and investors tend to overlook.

Catch the full conversation in the video below.

Key takeaways for investors from the interview with Ervin Yeo from CapitaLand Investment: Why some malls thrive and others don't. What really makes a good mall.

1. Retail Performance Cannot Be Judged by Rent Alone

One of the most common misconceptions is that mall success is defined by how fast rents increase.

In reality, headline rent growth provides limited insight. When rents are viewed over a longer period, increases in major Singapore malls since pre-COVID levels have generally been modest and below inflation. The perception of sharp increases often comes from comparing current rents with unusually low COVID-era levels.

More importantly, high rents are not sustainable if tenants cannot survive. Frequent store closures create vacancies, disrupt footfall, and weaken the overall mall environment.

From an operator’s perspective, the goal is not to maximise rent in the short term, but to ensure tenants can operate viably over many years.

2. Occupancy Cost Is a More Meaningful Metric Than Rent

Rather than focusing only on rent per square foot, mall operators pay close attention to occupancy cost, which measures total rental-related costs as a percentage of a tenant’s sales.

Occupancy cost includes:

• Fixed rent
• Variable or turnover rent
• Advertising and promotion contributions
• Management fees

For many F&B tenants, rent typically makes up around 17 to 20 percent of total operating costs. Other cost components, such as manpower and ingredients, have increased more significantly in recent years.

A mall is considered healthier when tenant sales grow faster than rents. This gap allows businesses to absorb cost pressures elsewhere and remain profitable. Over time, this alignment supports both tenant sustainability and investor returns.

3. Footfall Is the Foundation of Mall Performance

Mall economics still follow a simple sequence:

1. Footfall
2. Sales
3. Sustainable rents

Without consistent footfall, even attractive tenant concepts struggle.

However, footfall does not come from any single tenant. It is driven by trade mix, which refers to the balance of different tenant categories across the mall.

Successful malls typically avoid over-concentration in one category. For example, malls that are dominated by F&B may see strong lunch and dinner traffic, but weaker traffic during other periods of the day.

By maintaining a mix of retail, services, supermarkets, and everyday needs alongside F&B, malls create reasons for shoppers to visit at different times, which supports more stable sales across tenants.

4. Trade Mix Matters More Than Individual “Star” Tenants

While flagship brands attract attention, overall trade mix matters more than any single tenant.

Some tenants may not pay the highest rents, but they play an important role in generating consistent traffic. Bookstores, supermarkets, salons, and service outlets often anchor daily visits and support surrounding tenants.

From an operational standpoint, malls are designed so that different trades reinforce one another. This helps spread demand more evenly across the day and across different levels of the mall.

A well-curated trade mix improves tenant performance collectively, rather than relying on a small number of high-profile stores.

5. The First Floor Sets the Tone, but Upper Floors Define Quality

The first floor of a mall communicates its positioning immediately. Shoppers can quickly sense whether a mall is curated for experience or optimised purely for rent.

However, the real test of mall quality lies in the upper floors. Leasing space above the first two levels is more challenging and requires thoughtful planning.

Clear zoning, intuitive layout, and logical placement of anchors are critical. When shoppers understand where they are going and why, they are more willing to move vertically through the mall.

Malls that struggle to activate upper floors often face uneven footfall and weaker tenant performance.

6. Suburban Malls Play a Larger Role Than Many Expect

Unlike many global cities, Singapore’s suburban malls often perform as well as, or even better than, downtown malls.

This is partly due to Singapore’s urban planning model. Income levels are not strongly segregated by geography, and suburban areas regularly see demographic refreshes through new housing developments.

As a result, suburban malls can support international brands, strong F&B sales, and premium retail concepts. In some cases, brands now choose to open their first Singapore outlet in a suburban location before expanding downtown.

This dynamic is relatively unique to Singapore and has contributed to the resilience of suburban retail assets.

7. Mall Operators and Tenants Are Increasingly Partners

The relationship between mall operators and tenants has evolved.

In the past, limited retail supply gave landlords more leverage. Today, with higher operating costs and competitive consumer spending, tenant success is closely tied to mall performance.

Operators now focus more on:

• Tenant engagement and feedback
• Data sharing through loyalty programmes
• Coordinated marketing and promotional campaigns
• Flexible leasing structures, including pop-ups and short-term leases

This partnership approach aims to improve tenant sales while maintaining stable income for investors.

8. Community and Experience Are Structural, Not Optional

Community engagement is no longer a “nice-to-have” feature.

Many malls intentionally preserve large atrium spaces instead of maximising lettable area. These spaces support events, exhibitions, pop-ups, and community activities that drive repeat visits.

In suburban malls especially, community-based events help position the mall as a shared space rather than just a transactional one. Over time, this strengthens shopper loyalty and footfall consistency.

9. Operational Discipline Shows Up in Small Details

For investors and shoppers alike, mall quality can often be observed through small, practical details.

Cleanliness, maintenance standards, and layout clarity signal how an asset is managed. Operators that focus on ongoing maintenance tend to avoid costly, disruptive refurbishments later.

This long-term approach to asset management supports both shopper experience and asset value.

Transcript

0:00 to 4:45 – Introduction: The reality behind retail headlines 

Host Gerald introduces Ervin Yeo, CEO of Commercial Management at CapitaLand, to discuss the state of retail malls in Singapore. Ervin explains his motivation for sharing his views: to provide a nuanced perspective beyond the negative headlines of rising rents and struggling businesses. He highlights that retail is a "high emotion" sector where everyone has an opinion, and he aims to shed light on the efforts of the teams managing these spaces.

4:45 to 8:00 – Debunking myths about rising rents 

Ervin addresses the common misconception that mall rents are skyrocketing. He reveals that for CapitaLand’s portfolio, average rents have only increased by low single digits post-COVID—lagging behind inflation. He emphasizes that the goal isn't to spike rents, which leads to tenant turnover, but to achieve sustainable growth over the asset's 30 to 50-year lifespan.

8:00 to 11:15 – Understanding tenant costs and the "Occupancy Cost" metric

A deep dive into why tenants actually close down. Ervin explains "occupancy cost" (total rent divided by total sales) and breaks down the typical cost structure for F&B tenants: Cost of Goods Sold (COGS), manpower, and then rent. He argues that recent closures are often driven more by rising manpower and ingredient costs rather than rent, which has remained a relatively stable percentage of sales.

11:15 to 14:40 – Key metrics for a healthy mall

The discussion moves to how to evaluate a mall's performance. Ervin points out that a healthy mall should see sales growth outpacing rent growth. He also explains the importance of "trade mix"—balancing F&B with other services like hair salons or electronics—to ensure footfall is sustained throughout the day, rather than just during peak meal times.

14:40 to 18:50 – The unique power of Singapore’s suburban malls

Ervin highlights a unique trend in Singapore: suburban malls often perform as well as downtown locations because spending power is spread evenly across districts. He discusses the strategy of bringing international brands (like Pop Mart and Chick-fil-A) to Singapore to keep the retail scene vibrant and how brands are increasingly willing to open their first stores in suburban areas due to strong local demand.

18:50 to 24:45 – The landlord-tenant partnership

Ervin describes the shift from a pure landlord role to a partnership model. He explains how operators use data to help tenants optimize their sales and the benefits of a "network effect" for brands that open multiple stores, allowing them to better manage logistics and manpower. The segment touches on balancing the need to protect investor returns while ensuring tenants remain viable.

24:45 to 30:20 – Creating experience through design and operations

A look at the physical aspects of mall management. Ervin explains the value of large atrium spaces for community events (like chess tournaments) rather than maximizing rental space. He stresses that "retail is detail," citing how factors like restroom cleanliness, lighting, and scent are critical subconscious indicators of a mall’s quality that influence shopper behavior.

30:20 to 37:00 – Strategic planning and regional expansion

Ervin outlines how the team proactively manages lease expiries and Asset Enhancement Initiatives (AEIs) to refresh mall offerings every few years. He also discusses CapitaLand’s "offense as defense" strategy by expanding into Johor Bahru, aiming to capture cross-border spending and support Singaporean brands in expanding their footprint overseas.

37:00 to 40:20 – The wave of Chinese F&B brands

An analysis of the influx of competitive Chinese F&B chains. Ervin explains their high-turnover, lower-margin business model and how their scale allows them to undercut prices. He notes that while this challenges local operators, it ultimately forces the market to innovate and provides better value for consumers.

40:20 to 45:15 – Advice for tenants and investors

The interview concludes with practical tips. For tenants, Ervin advises choosing locations carefully based on their specific business model (high margin vs. high turnover) and leveraging operator resources. For investors, he cautions against misinterpreting "rental reversion" headlines and urges a deeper look at long-term lease structures and base effects when evaluating a REIT’s performance.

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