Warehouse retail in Singapore – a way to mitigate the rising occupancy costs?
August 4, 2015 / By Shuyu Sun
In the past nine months, there has been an increase in big-box retail developments (warehouse-retail) in Singapore. These have increasingly captured not only shoppers’ but retailers’ attention due to the wide range of reasonably priced products and the potentially lower occupancy costs.
The latest addition is an 11-storey megastore-cum-warehouse facility developed and occupied by local household electrical-goods retail giant Gain City. Two quarters ago, two similar-concept warehouse-retail projects – Big Box and Warehouse Club – officially opened and since then, have maintained a stable stream of shopper traffic.
Indeed, warehouse-retail is not a new concept that has gained overnight popularity. As early as 2004, the government introduced a pilot programme – Warehouse Retail Scheme (WRS) – to provide greater flexibility in the usage of industrial land. By allowing the retail component, not exceeding 40% of total GFA, and the remainder for industrial purposes, the scheme supported greater productivity and cost efficiency by encouraging consolidation of business operations such as logistics, headquarter management functions, and retailing to a centralised location.
Shortly after the introduction of WRS, four integrated projects with retail and warehouse components were approved; Giant supermarket, furniture store IKEA, electronics conglomerate Courts, and logistic company TT International. Land parcels dedicated to WRS are typically located in areas designated for non-pollutive industries in the outskirts of Singapore.
Despite the various benefits and opportunities that WRS offered, the pilot programme was stopped in 2007. The stringent requirements it imposed on applicants may have contributed to its termination. These included: 1) WRS developments had to be operated as a single entity with strictly no sub-letting of space; 2) goods not produced or stored in the development were not allowed to be traded/retailed there and 3) entertainment facilities and consumer and personal services, e.g. banking and beauty, were not permitted.
In the absence of this pilot programme, the industrial land zoned Business-White, which was introduced two years later in 2009, quickly filled the pent up demand for sites that support such warehouse-retail development. Business-White zones not only permit clean industrial such as warehousing and assemblage but also retail and supporting offices as well, subject to some quantum control. The recently completed Gain City Megastore and NTUC Warehouse Club are both built on such land. Gain City Megastore has been quoted to enjoy substantial occupancy cost savings of up to 25% and the greater flexibility, such as store layout and space configuration, that the warehouse-retail concept offers.
In my opinion, this cost-effective warehouse-retail concept, which allows the co-location of various business operations such as retail, management and logistics, could play a supplementary role and improve the attractiveness of Singapore’s retail scene.
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