Goodbye Cathay: Another Lesson in Why It’s Better to Own the Mall Than Run the Shop

The Final Curtain for Cathay

Cathay Cineplexes, under mm2 Asia, officially liquidated on September 1, 2025, following years of financial distress and mounting rental arrears. Its shutdown underscores the fragility of retail businesses amid shifting consumer behavior and economic pressures.

The closure immediately halted screenings across its last four cinemas – Causeway Point, Downtown East, Century Square, and Clementi. This follows years of financial struggles, with six outlets closed in the past three years.

Landlords had filed multimillion-dollar claims over rental arrears, including $3.4m from Lendlease Global Commercial REIT (Jem) and $2.7m from Frasers Centrepoint Trust (Century Square, Causeway Point). Other claims came from UOL Group (West Mall) and Resorts Concept.

mm2 Asia, already under strain, reported a net loss of $105.2m for FY ended March 2025, compared with a $5.7m loss a year earlier. Now, it’s getting more and more difficult to run retail shops with the proliferation of technology. Cathay Cineplexes’s liquidation serves as a stark reminder that it is much easier to be operating the mall than trying to run a retail business in Singapore.

The Twin Threats Facing Mall Retailers

1. E-commerce’s Impact on Hard-Goods Retail

A lot of people are sourcing their goods from Shopee, Taobao rather than travelling to brick-and-mortar stores.

2. Streaming Eroding Cinema Footfall

Streaming platforms have deeply undercut cinema attendance, eroding one of mall retail’s last anchors of consistent traffic – further exacerbated by the pandemic.

Malls Adaptive Pivot: From Brick-and-Mortar Shopping to “Experiences”

Singapore’s malls are evolving. The tenant mix is now dominated by:

• F&B outlets, beauty, wellness clinics, enrichment centers
• Gyms, banks, and specialty services like pawnbroking and jewelry stores
• Novel leisure concepts – play centers, escape rooms, laser-tag experiences

These sectors offer footfall and stickiness – traits digital alternatives cannot replicate. A decade-long shift toward experience-based tenants highlights mall resilience.

Retailers: Low-Margin Volatility vs. Landlords: Diversity and Stability

Retailers like cinemas, grocers, and F&B operators typically operate on razor-thin margins, often 2–5% and are highly sensitive to cost fluctuations and demand shocks. We compiled a list of retailers that have a strong presence in Singapore. Their average margins are about 2.68% with many racking in negative margins. This goes to show that building a retail business in Singapore is extremely difficult.

In contrast, mall landlords enjoy:

• Stable base rent + service charge structures. Generally, Singapore tenant agreements involve GTO (Gross Turnover) rent. This allows mall operators to take a cut of the earnings of tenants. This allows Singapore mall operators to outperform when consumption rises and maintain resilience if they underperform.
• Diversification of risk: There are hundreds of tenants meaning one failure seldom dents the overall performance.
• Scarcity of prime suburban mall real estate: Landlords are able to re-lease, refresh tenant mix, and lift rents post-AEI (Asset Enhancement Initiative). 
• Consistent Distribution Per Unit (DPU) for REIT investors, uncompromised by individual tenant performance.

We’ve compiled a list of REITs that operate malls in Singapore, their distributable income is in the high double digits. Furthermore, mall committed occupancy rates remain high. Many Singapore mall REITs have occupancy rates above 90%. Retail investment enthusiasm is also growing. Mixed-use developments are particularly attractive, buoyed by expectations of tourism rebound and hybrid work patterns.

DFI’s Retail Retreat: A Hypothetical Confirmation

DFI Retail’s S$125 million divestment of Cold Storage and Giant signals the difficulty of operating traditional supermarkets profitably in today’s retail landscape.

• Included in the sale were 48 Cold Storage stores, 41 Giant outlets, and 2 distribution centers.
• The Singapore Food business (supermarkets) accounted for about 9–10% of DFI’s group revenue but posted only break-even full-year performance. Its operating margin in food was just 1.8%, compared to 8.6% in Health & Beauty and 4.3% in Convenience – segments DFI will now focus on.

This mirrors Cathay’s demise – both are emblematic of long-term pain points for mall-based retailers.

If you have realized, there is a mass retreat of well-known brands that were once our go-to shopping places.

• John Little, with 174 years of operating history, closed its final outlet at Plaza Singapura in 2016
• Robinsons, with 160 years of brand loyalty, closed its last 2 department stores in Singapore in 2020
• Isetan, has been quietly reducing its operations in Singapore, closing its Tampines outlet in 2025
• Many top restaurant brands in Singapore couldn’t survive either. Eggslut, Burger & Lobster, Haidilao, have closed some shops or completely withdrew from operating in the country.
• With the latest addition, The Prive Group, has shut down all its restaurants in Singapore. This marked its permanent exit from the F&B industry. According to The Business Times, it had been listed on the market for years, but nobody was willing to buy the business, suggesting the difficulty of operating in the F&B market.

The dynamism of Singapore’s retailers suggests that brands come and go. It’s not about who is trending now but who will come next. Currently, there is a huge influx of Chinese restaurants into Singapore. They could lose their appeal if they cannot maintain cheap prices or manage market saturation when more competitors enter. Evidently, Eggslut was once a trendy topic, with long queue outside its Orchard store. However, it couldn’t last more than 5 years.

Scarcity and Value: Suburban Nodes in Action

Take Jem mall as an example: after Cathay’s cineplex closed with over S$4.3 million in rental arrears, the landlord swiftly replaced them with Shaw Theatres, underscoring resilience and reconfiguration capability. Similarly, i12 Katong reinvigorated its tenant mix with co-working clinics, automated F&B pickups, EV chargers, and urban farm installations.

The Takeaway: Singapore Is Still a Landlord’s Country

Investing in mall real estate – especially via REITs – is fundamentally safer than operating retail businesses directly:

• Steady income through diversified tenants
• Positive rental momentum and high occupancy rates
• Ability to adapt tenant mixes, driven by asset scarcity and strategic leases
• Resilience against shocks that bankrupt individual operators

Cathay Cineplexes and DFI’s grocery divestment reaffirm that the landlord stands taller when the tenant stumbles. While we do acknowledge that both REITs and consumer brands are cyclical in nature, it is generally easier to pick a REIT that will conserve capital than a consumer brand that will survive. In Southeast Asia, the consumption dynamism is only rising, there will be more new brands coming up with the growth of middle-income population. The possibility of the brands that we invest in will get replaced are very high. Many brands come and go, but prime location will always remain scarce. It is much easier for a mall operator to pivot rather than for a brand to change its offerings.

Join us to find out how Chris Ng uses his dividend income from REITs to support his family after he FIRE’d at the age of 39. Register here.