Mitsui ramps up SC investment

Jul 14

Mitsui Real Estate will open five major malls this year, including its first outlet mall in Hokuriku and a 90,000 sqm mega mall in Osaka. While Aeon plans to add even more new leasable space this year, Mitsui still remains the second biggest SC developer by new mall development, and continues to consolidate its SC brands through effective marketing campaigns, strong tenants and yet more entertainment.

Faced with increasing competition in SC development from Aeon and Mitsubishi, Mitsui plans to accelerate new builds over the next few years. Its latest three year plan called Innovation 2017 Stage II includes a full pipeline of new SCs, both at home and overseas.

For FY2014, Mitsui saw turnover of ¥171 billion from its shopping centre division within total commercial leasing sales of ¥464 billion, producing operating profits of ¥108 billion. Total sales for Mitsui Real Estate hit ¥1.5 trillion but it expects to add a further ¥300 billion through FY2017 ending March 2018. Operating profit is expected to rise from ¥186 billion to ¥245 billion. It will invest a total of ¥1.5 trillion in new builds between 2015-18, including office and residential developments.

As well as Lalaport Fujimi, another key SC will be its first outlet mall in the Hokuriku region, due to open this month in Oyabe, Toyama Prefecture with 160 tenants. With the Shinkansen now reaching Kanazawa, the region is expected to see a large increase in tourism given the strong cultural attractions. Other major malls this year will include Lalaport Ebina in Kanagawa, Lalaport Expocity in Osaka, and Lalaport Tachikawa. This is the first time Mitsui has opened five major malls in one year, and total new leasable SC space for 2015 will hit 315,000 sqm. Despite this, it will still lag behind market leader Aeon, which plans to open around 400,000 sqm of new space this year.

Looking ahead, in 2016-18 Mitsui will open new SCs in Hiratsuka in Kanagawa, Shibuya in Tokyo, and Nagoya and Togocho, both in Aichi. Overseas, it will invest ¥50 billion in new malls over the three years through FY2017. Key new SCs will be outlet malls in Malaysia and Taiwan, and the first Lalaport in Shanghai in 2018.

While new SCs are the key to growth, competition is intense, and differentiation is vital to long-term sustainability. SCs also face challenges from e-commerce. Added to this is changing consumer behaviour; while in the past, shopping would be the main purpose for a visit, today’s mall visitors want entertainment, services and a comfortable environment, which often means more open, green spaces too. In essence, while shopping remains the number one leisure activity in Japan, consumers want their malls to be leisure entertainment centres too, offering the kind of packaged and contained fun day out that Japanese families, singles and seniors love.

In suburbs and regional cities, malls are increasingly seen as community hubs too: places to meet, shop and entertain, but also where you can go to the doctor or get a tooth filled, educate your kids after school, or take some classes yourself. Luckily, these types of services are also exactly what is needed to combat e-commerce, making SCs into hubs whether in the local community or for domestic tourism.

Mitsui is adapting accordingly, while also designing in services and appeal for the burgeoning inbound tourist market at all new malls. As well as multi-lingual staff, it is also including more tenants specifically for foreign shoppers.

Mori enjoys better sales

Mori is at last seeing solid improvements in sales from its SC division. Sales for its three main Tokyo SCs, Roppongi Hills, Omotesando Hills and Venus Fort, rose 4.9% in FY2014, after a 2.1% increase the year before.

One of Tokyo’s leading property developers, Mori struggled to generate excitement and buzz for its Roppongi and Omotesando SCs in the early years, despite good locations. It has continued to adjust and refurbish the malls, adding in more appealing tenants along the way.

However, Roppongi Hills only managed a tiny 0.2% increase in sales in 1H2014, and Venus Fort 2.9% – Omotesando Hills grew 8.5%. In 2H2014, Venus Fort jumped 18% after refurbishing a third of of the mall during the previous Autumn with more emphasis on outlet tenants, and Omotesando added another 5% in sales.

More than management efforts, it is the lucky surge in inbound tourism that has proved the real boon and Mori is looking to redouble efforts to realign all three malls to meet the needs of foreign tourists. Next Spring will see a major refurbishment of Roppongi and Omotesando Hills from which Mori is hoping for another 4% uplift in sales.

Mori also just launched a store card called Hills Card, which is being used to spearhead a marketing campaign to raise the brand positioning of the Tokyo malls, with more services for high spending cardholders.