Saturday, 6 May 2017

(The Star) Napic deputy director warns of retail space oversupply in the Klang Valley

While Savills Malaysia managing director Allan Soo speaks on the software of retail sector, the National Property Information Centre (Napic) focused on the hardware, the bricks and mortar of retail.

At the Post-Property Market Report 2016 dialogue: Property Market Performance in Challenging Times recently, Napic deputy director Aina Edayu Ahmad voiced her concerns about the retail market which included shopping centres, arcades and hypermarkets.

Among these three classes of retail, shopping malls or shopping complexes dominate.

According to Aina, Malaysia on the whole has 157.56 million sq ft of these three segments of retail space.

Of this total, nearly a fourth of it, or 36.36 million sq ft are in Selangor. The Federal Territory comes a very close second with 31.72 million sq ft or a fifth of the total.

This may explain why shopping, or window shopping, is such a popular pastime in the Klang Valley.

While occupancy of malls remains strong at 84.7% for Selangor and 86.9% in the Federal Territory, the continuation of supply of mall space should be noted, Aina says.

“We have to be careful that the retail sector does not become like the office oversupply situation,” she says, referring to the office space supply in the Klang Valley.

About 30 complexes were completed last year. Starts and newly planned supply both softened in the retail sector in 2016. Although this space has been well tenanted in Selangor and the Federal Territory, the number of tenants are dwindling in Johor and Penang.

“We have to be careful about this,” she says. Aina also drew attention to commercial space – which retail falls under – and the residential sector. The residential sector is about mass ownership. This mass ownership among individuals, investors and corporate entities give stability to the residential sector. The commercial property sector is different. Commercial property is about business sentiment, says Aina.

When sentiment is poor, owners of these commercial properties, usually companies, are affected. Unlike the residential sector, there is no mass ownership.

In the event of a downturn, the massive ownership of residential units gives the housing sector its support and base, although there may be a fire sale here and there but there is holding power. This is not the case with commercial properties.

In the city, Suria KLCC maintained its crown securing both visitors and ringgit sales, and rentals of more than RM185 per sq ft (psf) for its lower ground floor units versus RM55 psf in Subang Parade, 1 Utama shopping centre and IOI City Mall, according to the Property Market Report 2016 released recently by the Valuation and Property Services Department.

This rental should not, however, be confused with the average rental of a mall. If one were to average out all the different floors, retail rental of a mall could average between RM6 and RM7 psf and RM10 to RM12 psf for the more popular malls.

According to KLCCP Stapled Group 2016 annual report, Suria KLCC sales reached RM2.5bil, the highest ever with 48 million visitors, over a 12-month period. On a monthly basis, this averages about 4 million visitors a month compared with KL Pavilion’s 3 million odd visitors.

Despite this enviable figures, malls in general were reporting tough times in 2015 and 2016. This is expected to continue into 2017. Some did better by “cutting” big space into smaller sizes, thus improving rental income. They all have to work harder to bring in visitors who will spend.