Suntec mall tenants seeking lower rents

May 8, 2008

Suntec mall tenants seeking lower rents

Tenants at the new Galleria see red over low traffic and sales that barely cover rent

By Joyce Teo

FED-UP tenants at the posh new Galleria area of Suntec City Mall say shopper traffic is so low that they can barely cover the rent. Yet, they say, the landlord has not done much to help them out.

Ten tenants, including retail giants Robinsons and Ossia International, have written to ask the landlord, Suntec Reit, to address their continuing losses.

They also said that not enough is being done to promote the upmarket shopping zone.

Ossia executive chairman Joe Goh said: 'We are paying Orchard Road rents. It's too expensive, and the traffic is too low.'

Some retailers have stopped paying rent, another has closed down, while others are trying to find alternative tenants to take over their leases. There are some that are even talking about taking legal action against Suntec Reit.

ARA Asset Management, which manages Suntec Reit, has declined to comment.

The situation at Roots - one of Ossia's two shops at Galleria - mirrored the complaints made by other tenants to The Straits Times.

Business is so poor that sales cannot even cover the monthly rent of more than $30 per sq ft (psf), and the shop now sells other brands to increase sales, said Mr Goh. It is also getting advice on taking legal action against the landlord.

'We are requesting to pay $20 psf,' he added.

Robinsons, which has the Fat Face and Principles outlets at Galleria, is facing a similar plight.

Mr Shia Yew Peck, general manager of finance and administration at Robinsons, said the rent at Fat Face is already 100 per cent of sales.

'Rentals have to be commensurate with the traffic,' he added.

Timberland, which opened a Galleria store in June last year, closed for a few months because of poor traffic, while another shop shut in January after just three months, said some tenants.

Average rents at Galleria, which is near the convention centre, are $24 psf, while the entire mall averages $10.92 psf.

The six tenants who spoke to The Straits Times yesterday are paying between $25 psf and $35 psf, and all are requesting relief in the form of lower rents, rental rebates or a few months' rent waiver.

A typical rent guide would be the equivalent to 15 per cent to 25 per cent of sales, they say.

A comparable situation arose at The Cathay, which opened in 2006. Its landlord gave tenants rental rebates of up to 50 per cent to ride out the slow sales period.

A similar move does not look to be on the cards at the Galleria.

'It's got to the stage where it (property manager) won't even listen to the tenants. All our pleas are ignored,' said Mr Charles Guerrier, managing director of Oosters Belgian Brasserie.

Some tenants were offered rent reductions of 5 per cent, but they said the amount was too low.

A consultant, who declined to be named, said: 'The rentals are actually not very high. It appears high only because of their poor sales. There are a lot of people walking through the mall, but it is just transient traffic.'

Still, there may be better news on the traffic front with the underpass connecting CityLink mall to Suntec City now open. The temporary bridge to Suntec City will be dismantled next Monday.

Meanwhile, at least two hard-pressed tenants have tried to find other retailers to take up their space - but to no avail.

joyceteo@sph.com.sg

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