It was recently reported in the news that Capitaland opened a Raffles City Mall in Chong Qing. While most of the media releases focus on the 900,000 strong crowd during opening day, In learning how and where to invest money in Singapore as beginners, it is important not just to look at headline news but also to personally assess the merits of a particular development. We will also be assessing the key highlights that you see in the media and assessing if the information is sufficient for you to feel certain about the investment.
About the Project
The Raffles City Chongqing project is a RMB 24 billion project that has a total construction floor area of 1.12 million sq metres. It is an integrated development which features the recently opened mall (235 k sqm), Grade A office space (150 k sqm), 1400 units of residential apartments, Ascott Service Residence as well as an InterContinental hotel. With the exception of the hotel, most of the other elements to this integrated development will be completed by the fourth quarter of 2019.
This project is very important as it is a landmark project for Capitaland in China, one of its key markets. To get some context, the entire China Property Portfolio is 42% of Capitaland’s total real estate book. This amounts to about SGD 43.5 B. While the entire Raffles City Chong Qing Project is not owned by Capitaland, you are looking at a project that is around SGD 4.6 B which is approximately 10% of the entire Capitaland China Portfolio.
What the media focussed on and whether it matters
The media mainly focused on three things about Raffles City Chong Qing.
1. How many people went for the opening: 900,000
2. How big the mall is: 235 sqm (twice the size of vivo)
3. The occupancy rate as well as tenant mix of the mall (98% and 40% of tenants are new to market)
Does the opening crowd matter? Not Really. Firstly, a 900,000 strong crowd may look like an armada in Singapore. However, it is actually a decent crowd for a mall of this size. Considering that 500,000 people registered to get to see the 135 k sqm Jewel Changi, both will work out to be about 3.7 to 3.8 people per sqm.
What matters the most out of the three headlines about the project is probably occupancy rate and tenant mix. With 98% of retail space leased out, we know that Capitaland was able to garner sufficient interest from tenants to try out this new location. This will mean that Capitaland has maximised the entire potential of the newly built retail space. However, what we do not know is if they have managed to maximise the rental potential as the increased occupancy can come at the expense of lowering rentals to attract new tenants.
On the part about tenant mix, it is important in so far as the mall adds a sense of novelty to attract the local crowds. This is because consumer taste is consistently evolving and Capitaland has to be one step ahead of consumers and know what they want before they want it. This will allow them to bring in new brands that will excite and intrigue consumers, making them walk through the door. Finding 160 over tenants who are new to the market, and convincing them to try for a retail space is no mean feat. In addition, putting all 400 odd tenants together into a coherent shopping experience is a huge accomplishment on the part of Capitaland’s Property Management Team.