Oriental Kopi is a Malaysian coffee shop chain renowned for its Portuguese egg tarts and its distinctive blend of Hainanese coffee, which combines Arabica, Robusta, and Liberica beans. In November last year, the brand opened an outlet at Bugis Junction, a mall owned by CapitaLand Integrated Commercial Trust (CICT). In June this year, Oriental Kopi opened another outlet at Nex, which is part-owned by Frasers Centrepoint Trust.
“Have you seen the queues at Oriental Kopi at Bugis Junction and Nex?” a seasoned equity analyst remarks. “I thought of going to Johor to try Oriental Kopi there during the June holidays. But I am not going to weather a three-hour jam to do so just because it’s cheaper.”
A box of seven Oriental Kopi egg tarts in Singapore costs $17.51, or $2.50 per piece. In Malaysia, they are sold at RM31.80 for a box of six, or RM5.30 ($1.60) per piece.
Oriental Kopi is part of Ervin Yeo’s defence strategy when the Johor Bahru-Singapore Rapid Transit System Link (RTS) is up and running. Yeo is the chief strategy officer at CapitaLand Investment (CLI), as well as the CEO of commercial management at CLI.
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The RTS link is likely to aid the cohesion of Johor-Singapore Special Economic Zone (JS-SEZ), which was formally signed between the governments of Malaysia and Singapore in January to strengthen business ties and increase connectivity between the two countries with initiatives such as passport-free clearance.
The benefits of the RTS and the JS-SEZ are likely to be felt in the long term. But the challenges for the local property and retail sector are likely to impact the REITs immediately.
By December next year, the RTS will have started, with the potential to ferry 10,000 passengers an hour between Woodlands North MRT Station and Bukit Chagar in JB Sentral, in both directions.
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“There will still be a jam, but on the RTS,” the analyst notes. The RTS will carry around 100,000 people a day compared to 300,000 to 400,000 who make the crossing daily on the Causeway, he points out. “Easier to queue at Bugis Junction to try out Oriental Kopi,” the analyst adds.
Traffic jams will not dissuade die-hard bargain hunters, according to Alan Cheong, executive director, research & consultancy, Singapore, Savills. He says: “More and more people I know are heading up north either more frequently or embarking on that ‘traffic jam adventure’. Singaporeans are a predictable lot and given the great price differential between Malaysia and here, and the penchant for locals for ‘good’ deals, they would carry quite a fair bit of their consumption over to Johor.”
Yeo also believes crossing the border will become a lot more popular. “Land crossings will be very easy with the RTS. One consideration would be the cost of travelling on the RTS,” he says.
Analysts reckon it would cost more than $12 for a round trip between Singapore and Johor via the RTS. The KTM train journey, which runs from the Woodlands checkpoint to the CIQ in JB Sentral, costs $5 each way. Some market watchers wonder if the RTS will cost twice as much — that is, $20 for a two-way trip.
Leakage inevitable
“If there are no new barriers of access enacted, like high fares and long delays at the customs, I believe that there will be further leakages,” Cheong says.
“The biggest savings are likely to be on service-oriented products because of salary (in SGD vs MYR) and government levies on foreign workers,” the equity analyst suggests.
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Yeo concurs. “Certainly, there’ll be some dislocations at the start. The first thing [to leak] is likely to be services. Singaporeans always love a good deal,” Yeo says.
From the government’s perspective, to what extent will it start policing the GST leakage? “There are significant arbitrage opportunities. When you have a GST arbitrage, then it’s significant savings. To what extent do we start policing GST leakages?” Yeo wonders.
The concern among analysts, market watchers and corporates is the impact the RTS could have on the Singapore property sector, including retail malls.
At CLI, the commercial management (previously property management) unit is the largest contributor to CLI’s fee-income-related earnings (FRE). In 1QFY2025 and FY2024, FRE from commercial management rose 4% y-o-y and 17% y-o-y to $95 million and $386 million, respectively. In 1QFY2025, the largest FRE contributor was Singapore, with 58%, followed by China (27%) and India (15%).
CLI’s annual report specifically says it aims to establish a strategic presence in new markets, such as Malaysia. “In particular, the JS-SEZ presents opportunities for both greenfield and redevelopment projects, allowing CLI to leverage our strong operational presence in Singapore and Malaysia and unlock value through our commercial management capabilities,” the report says.
CICT and the broader CapitaLand Group do not own properties near the border, in Woodlands and Yishun, but Yeo is aware that factors affecting malls in those areas will eventually filter to the rest of Singapore.
For instance, Sunway Group (see sidebar: “Competition from Johor”), in partnership with MRT Corp, is developing an integrated development in Bukit Chagar, which will be seamlessly connected to the RTS, featuring a car park, retail mall and other amenities. Sunway, in partnership with Equalbase, is also developing warehouses in the Free Commercial Zone. Then, there are the off-again-on-again tariffs from the Trump administration.
FCT owns Causeway Point and Northpoint City North Wing. On May 26, FCT completed the acquisition of Northpoint City South Wing.
In its annual report, FCT’s manager says it has conducted research on the potential impact and scenarios, held conversations with its retailers and F&B operators and kept close watch on the situation.
“We believe Causeway Point is well-positioned as the connection hub in the Woodlands region for the RTS travellers and the working population, in addition to the residential catchment. We anticipate higher shopper traffic at Causeway Point, driven by the rise in residential and commuter traffic. This gives us the opportunity to enhance the retail and F&B offerings with the rise in shopper traffic and improved spending capacity,” FCT’s manager says.
“We believe the upside opportunities from the upcoming developments and increase in working population and residential catchment in the North Region will outweigh the downside risk from the retail sales loss to Johor Bahru,” FCT’s manager adds.
Playing defence
In Singapore, CLI and CapitaLand Group have an ecosystem with their tenants across different platforms. Yeo cites Don Don Donki as an example. In Singapore, Don Don Donki uses CLI’s warehouses (owned by CapitaLand Ascendas REIT or CLAR), while its stores are in malls owned by CICT and its office is also in a CICT-owned property.
Similarly, Putien’s central kitchen is in a property owned by CLAR, and its restaurants are in malls owned by CICT. “We have that sort of ability to look at a customer’s real estate needs across its value chain,” Yeo says.
NTUC Enterprise Cooperative is one of CICT’s top 10 tenants, with its tenancies spread across supermarkets (FairPrice), health and beauty (Unity) and warehouses with CLAR. Similarly, Cold Storage is also a supermarket as well as a health and beauty tenant at CICT’s malls, and a warehouse tenant with CLAR.
In the 2010s, to counter the e-commerce threat, local malls started offering experiential shopping. F&B was a low-hanging fruit, comprising around 30% of most malls’ gross rental income (GRI) and net leasable area (NLA). Fast fashion gradually became somewhat passé, and the likes of Topshop, Guess, Gap, and others have almost disappeared from our malls.
CICT has derisked the F&B and services businesses concentration in its malls because of its large asset base, with assets of $26 billion. Committed GRI for F&B was 17.9% of total GRI in FY2024, with leisure and entertainment at 2.3%, retail services at 1.2% and education at 0.9%.
Based on FCT’s 1HFY2025 results presentation (FCT has a September year-end), 37.7% of GRI and 30% of NLA are from F&B tenants.
Yeo has extensive experience managing malls in China, where competition is intense, including cross-border competition.
“When I was in China, we (Raffles City Shenzhen) were the ‘Johor’, trying to pull the Hong Kongers over. We were playing offence then. Now I have to learn to play defence. Defence means recognising that some retail customers will go over [to Johor],” Yeo says.
As mentioned, Oriental Kopi is the first step in this defence. Singaporeans tend to go to Johor for food and other services. “We bring [these brands] here and we find a way that works for them, because if they came here alone, they wouldn’t survive,” Yeo says.
Oriental Kopi shares a kitchen with Singapore-based restaurant operator Paradise Group. “Paradise can secure cheaper ingredients in Singapore, so their cost comes down,” observes Yeo. Due to manpower restrictions, sharing the enlarged corporate office will help Oriental Kopi offset its foreign worker quota.
According to the Ministry of Manpower (MOM) website, the foreign worker quota or dependency ratio ceiling (DRC) for the services sector, which includes F&B, is 35%. The foreign worker quota is calculated based on the average number of local employees in a company over the last three months.
Restaurants and cafés have two issues that cause them to close (and open) regularly: manpower and rent. Service workers are usually foreigners whose employers have to grapple with permits and MOM rules and regulations.
“There are things at the margin that maybe we could be more flexible about helping to sustain this manpower pool in Singapore,” Yeo says.
Keeping investors and tenants happy
Keeping investors and tenants happy for mall owners implies being partners with the tenants, as articulated by Yeo.
The tough retail environment has not gone unnoticed by analysts. “Retail is very hard work. You are curating a mix and the rent is not predetermined. Watsons, Uniqlo and a jewellery store are all paying different rents,” the analyst says.
Wong Xian Yang, head of research, Singapore & Southeast Asia, at Cushman & Wakefield, concurs. “The range of retail rents can range very widely, and is dependent on several factors such as location, size, visibility, trade, etc.”
A quick glance at FCT’s annual report shows that F&B rents are in the high teens per sq ft per month (psf pm), compared to supermarkets in high single digits, leisure & entertainment (cinema usually) at mid-single digits, fashion in the mid-teens, and jewellery & watches, which is the highest.
There are also major differences between strata-titled malls and malls in the REITs. “Singapore’s retail market is a two-tier market. Prime malls, boasting a well-curated tenant mix and strategic locations, enjoy high foot traffic and are highly sought after by retailers. Consequently, they enjoy high occupancy rates and have the pricing power to increase rents. In contrast, weaker retail malls will likely face ongoing challenges, characterised by higher vacancy rates and limited ability to increase rents,” Wong says.
CBRE Research estimates that there are approximately 150 strata malls and 400 retail developments in Singapore. Their presence is a foil to the malls owned and operated by CICT and FCT.
In a LinkedIn post titled “Put Away the Pitchforks” on June 9, Yeo points out that the rental yield of retail space is likely to be at a rate where the owner can at least cover the mortgage. Hence, the rent of strata space, whether in a strata mall or shophouse, can be vastly different for adjacent units due to the cost of the unit or shophouse. In the LinkedIn post, Yeo draws the distinction between the rents needed to cover the mortgage of a shophouse that was transacted at $1.75 million versus one that was transacted at $3.2 million, where the yield of both is likely to be around 3.2%.
“Your holding cost is different. Your return is different because you want to at least cover the mortgage,” Yeo says. Once, it used to be that the rents were low enough to justify amenities such as toilets on the premises.
“Now, more and more units are transacting and the breakeven rents are higher. I can totally empathise with these small indie (independent micro business) guys,” Yeo reasons. “I do think that it’s getting harder and harder to stay indie, because you don’t want to keep moving due to high rents.”
So far, despite the interest rate volatility, Covid, inflation and now the tariff war, the retail REITs have kept their returns relatively stable. CICT owns a total of 14 malls in Singapore, including those that are part of integrated developments. FCT owns nine malls, including Northpoint City South Wing.
“Most assets that are investable are already in REITs. If you’re already in a REIT, everyone has a similar starting line and end line. A rent that the FPL [Frasers Property Singapore] Group cannot accept is also a rent that CLI is unable to accept. There is order to the market because once you’re in the REIT, you’ve got similar capitalisation rates; you’re facing the same investor base. Your distribution per unit (DPU) is similar. Your properties are close to each other,” Yeo explains.
“He (Yeo) has to make rents sustainable for tenants and the REITs,” the analyst says.
In his LinkedIn post on June 9, Yeo refers to metrics such as occupancy cost (OC) and rental reversions to illustrate the order in the market.
OC is total rent as a percentage of total sales; the lower the number the better. In his LinkedIn post, Yeo says: “If your rent is $2,000 a month and your total sales is $10,000 a month, then the OC is 20%.”
In FY2024, CICT’s OC was 17.1% and FCT’s was 16%. Yeo adds that OCs vary according to the trade (some trades have higher margins and so can stomach higher OCs, whereas trades like supermarkets and electronics generally need single-digit OCs as their rents are lower, with supermarkets rents in single-digits psf pm).
“This suggests that the revenues of our tenants are at a sustainable level relative to their rents. In particular, the OC for the F&B trade category across CL malls is still less than 20%, which is also lower than before Covid. OC is an efficiency measure and a proxy for rent affordability,” Yeo writes in his post.
According to Wong of C&W, overall islandwide retail vacancy rates are at about 6.8% (as of 1Q2025), below pre-pandemic levels of 7.5% (4Q2019). “This indicates healthy demand for retail and suggests that retail rents on average remain sustainable,” he says. He maintains, though, that the retail operating environment remains challenging, given elevated labour costs, rents and intense customer competition. “The inherently challenging nature of retail operations means that the retail landscape will continue to experience a steady cycle of closures and new openings,” Wong adds.
Flexibility
Yeo highlighted the difference between a mall in a REIT and a strata mall with a Boat Quay and Clarke Quay analogy during the recent interview.
CQ @ Clarke Quay is an asset owned by CICT; the shophouses along Boat Quay are owned by different entities. “Boat Quay represents a lot of individual owners who pick tenants based on who can pay more,” Yeo says. That may imply that Boat Quay shophouses could end up with a lot of similar trades next to each other, similar to a strata mall.
CQ @ Clarke Quay is known for its nightlife and as it is owned by CICT, its offerings can be curated. Zouk, the nightclub, is at CQ @ Clarke Quay. “We are shifting the centre of gravity for the partying (nightlife) to the left,” Yeo says. To the right of CQ @ Clarke Quay are CanningHill Piers, a residential development jointly developed by CapitaLand Development and City Developments; a Somerset-branded serviced residence owned by CapitaLand Ascott Trust; and Moxy, a hotel owned by CDL Hospitality Trusts.
Yeo says: “CanningHill Piers is our development. On the right, nearer CanningHill Piers, is lifestyle, where NTUC Fairprice, Swee Lee etc are situated. We are taking into account overall estate planning. If you keep all the clubbing there, you’re setting yourself up for failure.” The Swee Lee outlet at CQ @ Clarke Quay allows customers to listen to vinyl records at the cafe and try out the guitars. “Every time I go to Swee Lee, I feel happy, because it tells us that if you get the right tenant, the right crowd will come,” Yeo remarks, adding that he views tenants as partners.
Yeo, a President’s Scholar who spent time at government agencies such as MOM, brought with him certain insights when he joined CLI.
For instance, NTUC Fairprice is experimenting with having bars and cafes in its supermarkets, as is the case at its outlet at CQ @ Clarke Quay. Similarly, Scarlett in Westgate has an area when shoppers can have a meal. “You see this model in China, like the Alibaba supermarkets. In a way, it’s arbitrage. You’re using supermarket rents to arbitrage F&B revenues. We get mixed reviews from the [other] tenants,” Yeo acknowledges.
In Singapore, partygoers used to be able to buy liquor at convenience stores and drink outside nightclubs into the wee hours of the night. Not any more. Public consumption and retail sale of alcohol by supermarkets and convenience stores are prohibited between 10:30pm and 7am, although alcohol can be consumed in licensed establishments such as restaurants, bars and nightclubs.
Asset plans
How does CLI and CICT decide which brands to bring in? The group has a leasing team that does asset planning. “Our asset plan will usually be down to the granularity of the trade category. We start with a percentage where F&B is 30%, fashion 50%, services 20%. Then within F&B we decide on ticket size, Western or Asian. First, we start with getting the percentage right,” Yeo says.
Unlike other mall owners, which run a CMO or Centre Management Office model for each mall separately, CLI runs leasing centrally. Hence, with 14 malls, a major tenant such as McDonald’s discusses which malls it wants to be in with the central leasing team.
The bigger chains that require many locations are likely to be key accounts for CLI. For instance, which is the best spot for Lululemon? Instead of a CMO, CICT can see the big picture.
“In China, I met tenants very regularly to understand their business model. These are the smartest guys. They know exactly what’s happening, because it’s their own money; they see consumerism from the ground up. They know what people are sensitive to, what pricing is. I talk to a lot of consumers, a lot of retailers in Singapore. I myself am a consumer,” Yeo points out.
More than that, Yeo is aware that his role has changed over the years. “IR has meant a lot of different things to me over the years. When I was in the Ministry of Foreign Affairs, IR was international relations. When I went to MOM, it was industrial relations. Now, IR is investor relations. It’s been an interesting journey,” Yeo reflects.
