The issue that is cropping up for retail real estate investment trust (REIT) investors would be the question of the Johor Bahru (JB) – Singapore Rapid Transit System, or RTS, and how this may affect the local retail scene. Scheduled to open in late 2026, the narrative is that RTS would draw some of the shopper traffic away from Singapore shopping malls, due to the convenience of a seamless transport mode into JB via the local MRT subway system.
Screenshot of Causeway Point and Northpoint from presentation slides of FCT’s second half and financial year ending 30 Sep 2024.
One REIT that could experience a relatively large effect would be Frasers Centrepoint Trust (FCT), with its highest earning Causeway Point being the largest mall nearest to the Woodlands Checkpoint, not to mention that another mall, Northpoint City North Wing, is the northern part of Singapore, too. The addition of a deemed easy access means to JB naturally brought concerns to FCT unitholders, with us included.
DBS equities research group had indicated in a report in July 2024 that there is a projected leakage of between 3% and 4% of the 2023 retail sales, with food and beverage (F&B), and services in particular feeling the impact1. In FCT’s results presentation in October 2024, among some points, it is believed that the northern malls Causeway Point and Northpoint City could give an opportunity for Malaysian retailers to expand their presence locally, and Causeway Point could serve as a connection hub for commuters and shoppers transiting between Woodlands and JB2. The range of responses from financial bloggers are varied, from a “all will normalize in time” to “retail scene here is doomed!”, or something along that line.
The Bedokian’s Take
With varying takes on how the RTS affects the FCT northern malls, we could only make calculated guesses (guesstimates) on how things will pan out. The first statistic to get would be knowing the number of Singaporeans visiting JB, and according to a source from the Singapore Business Review, a report stated that around 31% of Singaporeans go there at least once a month3. This is a substantial proportion in my opinion.
Next, I asked around and heard from my relatives, friends, colleagues and acquaintances regarding their trips to JB, and while the common objective is for entertainment (food, shopping, massage, etc.) for those who went, the frequency of visits is very wide (e.g. once a week to never been there in x years).
Besides for work purposes, the most common finding from my questioning and probing would be the element of time. Most would go only in at the convenience of their own time, such as during weekends, holidays and in late night or early morning hours. The time spent there is not just like an hour or two, but rather at least four or more. Thus, while going into JB, many things are done there as compared to going into a local mall.
That being said, local malls still have a place to fill, catering to either a time too short for an enjoying trip to JB (e.g. going for lunch hour during work, or a quick pickup of an item), or for those people who, for some reason, would not want to go to JB. Though what I surmise here and in the last paragraph are anecdotal, we do not really know how the impact would be when RTS finally opens, and if I really do want to say a piece of the future, it would likely be met with a lot of fanfare, followed by normalisation of the crowd. Possibly there will be some increased frequency of visits for those who goes there often, and probably some converts of those who do not really like going there. Thus, the leakage rates highlighted by DBS is a plausible possibility.
We will see how it goes.
Disclosure
The Bedokian is vested in FCT.
1 – S’pore Retail & Retail REITs: More fad than trend? DBS. 10 Jul 2024. https://www.dbs.com.sg/treasures/aics/templatedata/article/generic/data/en/GR/072024/40710_insights_singapore_retail_and_retail_reits_more_fad_than_trend.xml (accessed 1 Dec 2024)
2 – Results Presentation for the Second Half and Financial Year 2024 ended 30 September 2024, p40. Frasers Centrepoint Trust. 25 Oct 2024. https://fct.frasersproperty.com/newsroom/20241025_071259_J69U_TR4IT4NEKBF1OP2M.3.pdf (accessed 1 Dec 2024)
3 – 1 in 3 S’poreans visit Johor Bahru monthly for leisure. Singapore Business Review. 15 Feb 2024. https://sbr.com.sg/leisure-entertainment/news/1-in-3-sporeans-visit-johor-bahru-monthly-leisure (accessed 1 Dec 2024)
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