Bricks-and-mortar retailers globally have taken a hit from e-commerce, but while Singapore's malls have felt the pinch, investors are still eyeing the city-state.
But that doesn't mean investors are entirely gung-ho.
Rushabh Desai, head of Asia-Pacific for Allianz Real Estate, said he's still evaluating potential investments into Singapore, expecting the commercial sectors would likely correct further over the next six to 12 months.
"We are looking at retail that is non-discretionary. The larger portion of the retail is nondiscretionary, even if it's suburban retail," he said on the sidelines of the ULI Asia Pacific Summit in Singapore on Wednesday. "I think that is a strong subsector within retail versus the luxury outlets."
But he noted that rental yields would still be low.
"Even if the prices fall, I think it's not going to go from a 4 percent yield to a 6 percent yield, it'll be 25-50 bps movement," Desai said.
Allianz Real Estate, a long-term investor, can buy physical properties as well as investing in other property-related assets. Around 2 percent of its global portfolio, which was around 50 billion euros ($56.28 billion) as of the end of 2016, is currently invested in Asia.
Retail rents in Singapore have already dropped sharply, while vacancies have risen.
In the first quarter of this year, the retail rental index fell 2.9 percent on-quarter to 101.1, down from levels around 120 in 2012, according to data from the government.
The vacancy rate rose to 7.7 percent in the first quarter, from 7.5 percent in the previous quarter, and the island nation has a pipeline of around 606,000 square meters of retail space to look forward to.
In the Orchard planning area, where the tony Orchard Road shopping district is located, the vacancy rate was 7.6 percent in the first quarter, up from 6.8 percent in the previous period.
Retail sales have been squeezed, with department store sales in March falling 3.6 percent on-year and computer and IT equipment sales declining 5.2 percent on-year, even as the total excluding motor vehicles rose 0.7 percent on-year, supported by rising petrol station sales.
But Daiwa property analyst David Lum noted in a report this week that many of Singapore's malls remain as productive on a sales-per-square-foot basis as some of the top-tier malls in the U.S.
Lum also noted that the best-performing malls in the suburbs, which in tiny Singapore excludes the central business district and other central areas, had sales-per-square-foot that were comparable to the more luxury-oriented Orchard Road malls.
The report cited data from research firm Green Street Advisors, which showed that the highest-grade malls in the U.S., which numbered less than 40 there, generated sales of around $965 a square foot a year, while a B-grade mall brought in around $415.
Lum estimated that luxury Orchard Road mall Wisma Atria brought in $1,122 on the same basis, while suburban Northpoint racked up $949, Yew Tee Point brought in $849 and JCube had around $371.
"The absolute productivity of suburban malls is probably underappreciated by the market," he noted, pointing to their near-total reliance on nearby housing estates and proximity to transportation links.
Lum also wasn't convinced that e-commerce would necessarily be entirely negative for the retail-property sector, adding that the city-state's underperforming malls could add more "retail experiences" to complement the nearby stores.
That ecommerce isn't a bricks-and-mortar retail death knell appears to be a conclusion shared by other property investors.
Singapore wealth fund GIC's COO Goh Kok Huat said at the Urban Land Institute Asia Pacific Summit in Singapore on Wednesday that he still expected gains from the segment, although GIC's mandate bars it from investing in Singapore's property market.
"In the real estate group, three or four years ago now, we concluded that online retail is going to cause some consolidation of physical retail space," Goh said.
"We concluded that over time, the dominant retail spaces will probably win, the neighbourhood convenience retail spaces will probably win, and those in between would probably be most endangered," he said, adding that some of those assumptions were playing out.
GIC, which manages Singapore's reserves, does not reveal its portfolio size, but on its website it said the amount was "well over $100 billion." Around 9-13 percent is allocated to property.
After a buying spree in Asia in the late 1990s following the Asian financial crisis, much of GIC's property holdings are in the region.
Another large investor, Mitsui Fudosan Investment Advisors, which had around 1.312 trillion yen ($11.96 billion) under management at the end of March, pointed to the need to tweak the mall formula.
Shuji Tomikawa, president of Mitsui Fudosan, said at the ULI Asia Pacific Summit in Singapore on Wednesday, that for one large shopping center in Japan, the food court had ballooned in importance, with three generations of a family more likely to go to the mall to eat, rather than to shop.