|CMT's Bedok Mall|
Recently, there has been a lot of negative news regarding the retail industry. Island-wide vacancy stock reached 5 million sq ft or 7.7 per cent, which is equivalent to the size of about five VivoCities. To experience how online shopping has affected retailers here, I decided to work in the retail sector during my school holidays. I am currently working at a suburban mall in the east. From my observations, the prospects of the retail sector is rather bleak. Sales are tepid and the store holds quite a large amount of inventory. Most common items can also be bought online, at a lower price.
Nonetheless, dividend-seeking investors may still be interested in retail REITs, if they are priced at a attractive valuation. Much would depend on the innovative ability of retail malls to fend off intense competition from e-commerce. Retail REITs would have to redefine the retail experience when they upgrade or develop future malls. For example, CMT's redevelopment of Funan Mall focuses on providing an experiential retail concept for consumers, allowing them to test and feel products, which online shopping cannot offer.
Capitamall Trust (CMT) and Frasers Centerpoint Trust (FCT) are two large retail REITs listed here, and I decided to compare their portfolio performance and financial strength, to see which REIT is a better investment.