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Malaysia: Retail sector enters consolidation phase
PETALING JAYA: The retail sector is entering a consolidation phase with retailers re-strategising in order to adapt to new challenges, the Association of Complexes Management Malaysia said.
Also known as Persatuan Pengurusan Kompleks Malaysia, its president Tan Sri Eddy Chen said the recent revision of the Overnight Policy Rate by 25 basis point is decidedly a negative for the industry.
“The retail market is still affected by the imposition of the goods and services tax.
“Given that household debt against the gross domestic product (GDP) is still relatively high, at about 85%, this will impact the discretionary spending ability of consumers.”
Chen was asked about the state of Klang Valley’s retail scene in view of Parkson departmental store’s departure from Maju Junction in the heart of the city.
Chen said occupancy rates of shopping malls in Malaysia have been rather consistent, and for those that are located in Kuala Lumpur and Selangor, their performance is even better despite the number of new malls entering the market.
Average occupancy rates are at 85.2% and 86.2% for Kuala Lumpur and Selangor, respectively, between 2010 and 2017, he said.
“Strategic planning and proactive management are essential for successful malls, especially in this challenging climate,” Chen said.
He said it is vital any future development to be built on a foundation of careful market research to ensure the type, form, scale, and profile of retailing matches the requirements, habits, preferences, and affordability of its target market in the specific locality.
Retail consultancy RCMC Sdn Bhd director Richard Chan said that although there is an oversupply of retail mall space and the emergence of e-commerce, the success of malls in the Klang Valley goes beyond these two often-cited reasons.
“How then do you account for some malls with nearly more than 90% occupancy rates?” he asked.
So before a mall is built, the developer or owner needs to do some in depth feasibility and market studies, Chan said.
While it is true there is a huge supply of mall space in the Klang Valley, if there are already a few malls within a radius of 1 km, there is no need to add another one.
This is the crux of the problem.
Within a 1 km radius of Maju Junction is SOGO departmental store, Pertama and Campbell complexes and Quill City Mall, Chan said. Parkson occupied about 200,000 sq ft in at Maju Junction located at the Jalan Sultan Ismail-Jalan Tuanku Abdul Rahman intersection and was also operating in Sungei Wang Plaza and Suria KLCC.
Moving forward, Chan said it is possible to change the retail concept at Maju Junction with Parkson’s exit.
The former Metrojaya outlet in Section 14, Petaling Jaya and Imbi Plaza were both converted to digital retail space.
Tweak the retail concept, he said.
Property consultancy CBRE|WTW said that increasingly, mall operators are giving more space to food and beverage (F&B) and services in their retail mix.
Managing director Foo Gee Jen said: “You can’t eat online.”
“However, F&B (tends) to lower rental comparatively and this is the situation in most malls today,” he said at the 2018 Real Estate Outlook for Malaysia and the Asia-Pacific.
Another trend he is seeing is more short-term tenancies. Foo said some mid-sized retail outlets are signing up on a month-to-month basis.
On the emergence of e-commerce, Singapore-based CBRE Pte Ltd head of research (Singapore and South-East Asia) head of research Desmond Sim said the Klang Valley retail scene is unlikely to be impacted as much as in US and China by e-commerce. US and China have vast land areas and population can be space although cities are densely populated. One need to drive one to two hours to reach retail. This triggered the exponential growth of e-commerce in US and China.
Nonetheless, Savills Malaysia Sdn Bhd deputy executive chairman Allan Soo said mall operators and owners need to ask some tough questions. “Against the e-commerce backdrop, how will mall owners ensure their yield and value keep on growing? “What strategies do they have to maintain value?” Soo asked at the Jan 23 Property Market Outlook for 2018, organised by the Association of Valuers, Property Managers, Estate Agents and Property Consultants in the private sector.
Source: https://www.thestar.com.my/business/business-news/2018/02/05/retail-sector-enters-consolidation-phase/#Vi7RlXxXkWe5EQu7.99