Why Tangs and Takashimaya remain profitable as rivals close stores

Not all Orchard Road addresses are equal, said Knight Frank’s Mr Hsu. Visibility, the mall’s tenant mix and the department store’s location all matter significantly.

“Having an Orchard Road address helps, but it’s not a silver bullet,” he said.

Prof Lee noted that Metro’s outlets are “typically mid-sized formats” embedded in larger malls where landlords control the overall concept and tenant mix. “The department store is one anchor among many, not the ‘spine’ of the asset in the way Takashimaya is for Ngee Ann City,” she said.

The compatibility with surrounding tenants is another factor, she added. 

Paragon’s upper floors cater to luxury brands and medical specialists, putting pressure on a mid-market department store to justify its footprint against higher-rent specialty tenants. 

Isetan’s stores tend to carry more generic mid-market merchandise that overlaps with other mall retailers and online offerings, resulting in weaker differentiation and synergy, Prof Lee said.

DOES HAVING A HEARTLAND LOCATION HELP?

Isetan’s and Metro’s suburban outposts – at Nex in Serangoon and Causeway Point  in Woodlands respectively – are “double-edged swords”, experts said.

While these locations are frequented by loyal neighbourhood shoppers, those customers are typically more price-sensitive. Competition from supermarkets, discount chains, specialty shops and e-commerce is intense, Prof Lee said.

“The average basket size and willingness to pay for premium brands are usually lower than in Orchard or VivoCity,” she said.

At the same time, heartland malls increasingly allocate space to F&B, enrichment, healthcare and services that cannot move online as easily. Rising rents make large, multi-level department stores harder to justify.

The closure of Isetan Tampines reflects this broader reconfiguration of heartland retail space, Prof Lee said.

Mr Hsu pointed out that while heartland stores may benefit from lower rents, reduced footfall and sales density – the amount of revenue generated per square foot of retail space – means these outlets are unlikely to compensate for underperformance at flagship locations.