THE INFLUENCE OF EXPERIENTIAL MALLS ON RETAIL REAL ESTATE IN SINGAPORE

Abstract

Due to the popularity of e-commerce, there have been dynamic shifts in Singapore’s retail landscape from traditional retail concepts into experiential retailing. This is demonstrated by the rise of experiential shopping malls like Jewel and Funan Mall which have both garnered massive attention from the media. Recently, there has been an exponential rise in literature studying the impact of experiential retailers on the shopping experience for consumers. However, there is a dearth of literature focusing on how the whole experiential mall influences the retail landscape in Singapore. With the advent of more experiential shopping malls, it is crucial to understand their impact on surrounding retail entities so that these entities can evolve and adapt to the changing trend to stay competitive. Hence, this dissertation is a quantitative study that assesses how the opening of experiential shopping malls, namely Jewel and Funan Mall, have impacted the rents of the retail entities within their respective catchment areas. The main regression employs a hedonic pricing regression with a difference-in-difference (DID) estimator and fixed effects model. A total of 3,413 and 3,416 observations were collected for the study of Jewel and Funan Mall respectively. The study shows that there is a 3.86% decrease in rents for retail entities within Jewel’s catchment area, while there is a 7.35% increase in rents for retail entities within Funan’s catchment area. This proves that the opening of Jewel is a competitive force that led to a decrease in rents. Hence, to maintain healthy rental rates and a steady growth, retail entities should reinvent themselves if their rents are negatively affected by the presence of an experiential shopping mall. On the contrary, Funan Mall’s completed AEI is a cooperative force that brought up the rents of its surrounding retail entities. However, the increase is not guaranteed in the long run due to the competitive scene. Coupled with the scarcity of land in Singapore, retail entities should continue to evolve with the dynamic shifts in Singapore’s retail landscape to stay competitive, or suffer the risk of diminishing rents for their retail entity.