PETALING JAYA: Less established and new shopping centres without high pre-committed take-up will continue to face challenges this year in the diluted retail market, as supply continues to outstrip demand.
In its Real Estate Highlights 2nd Half 2018 report, Knight Frank Malaysia said rentals will continue to be under pressure as operating costs rise although the new increase in minimum wage is not expected to have a major impact on the retail industry.
“As the retail market remains challenging, it can be observed that malls are taking proactive measures to create new experiences in order to remain relevant. For example, Fahrenheit 88 recently welcomed the country’s very first pop-up Selfie Museum to create a multi-sensorial experience that matches the contemporary ‘insta-worthy’ trend. With modern shoppers becoming increasingly tech savvy, malls are now banking on the use of social media to attract more patrons,” said Knight Frank Malaysia associate director of retail leasing and consultancy Rebecca Phan.
“Vis-à-vis the implementation of The Goods and Services Tax back in 2015, the introduction of Sales and Service Tax did not significantly dampen consumer spending, with the consumer sentiment index remaining at expansionary levels. This serves as a boon for the retail market amidst the current challenging environment,” she said.
Moving into 2019, Phan said less established and newer malls will find it challenging to compete in a diluted market and rental growth will likely be muted as retailers continue to be spoilt for choice.
Knight Frank said owners and operators of existing shopping centres need to continuously refresh and reinvent their assets and offerings by embarking on asset enhancement initiatives while retailers need to ensure that their stores remain relevant to cater to current shopping habits.
In terms of investment and revaluation, the market value holds steady with some of the prime shopping centres reporting an average increase of 1% to 4.5%.
In 1H2019, another six new shopping centres/supporting retail components within integrated developments with a combined retail space of 4.04 million sq ft are expected to come onstream.
Retailers continue to be spoilt for choice as developers of new and less prominent shopping centres offer attractive incentives, partnership and short-term tenancies to pop-up retailers to improve occupancy levels.
Moving forward, Knight Frank expects hypermarkets to downsize as their owners respond to current consumer preference for smaller stores as well as the closure of non-profitable outlets due to changes in domestic retail trends.
Tesco Stores (M) Sdn Bhd is reportedly looking to venture into property development to monetise its assets by redeveloping larger stores in selected localities while premium neighbourhood grocers such as Jaya Grocer, Village Grocer and Ben’s Independent Grocer have successfully incorporated food experiences within their selected outlets.
Retailers are also embracing technology to innovate in-store experiences such as automated restaurants and unmanned convenience stores.
Source: The Sun Daily