Will rentals drop in Suria KLCC?

A common theme in the notes of companies quarterly results is how the movement control order (MCO) and Covid-19 pandemic is affecting their business.

In this respect, if anybody had wanted to know if rental rates in Suria KLCC are affected and what mitigating measures are being taken by the company, they would not have had a clue based on the results of KLCC Property Holdings Bhd (KLCCP).

In its first quarter results released earlier this week, KLCCP stated that the hotel operations, which essentially is Mandarin Oriental, was affected by the MCO, which kicked in on March 18. The hotel division chalked up a loss while the retail and office spaces continued to show growth in profits.

The hotel was closed to new guests and continued to serve only long-staying guests. As for Suria KLCC, which is the premier mall in the country, it was also closed with the exception of pharmacies, supermarkets and banks.

The mainstay of KLCCP is the rental from its office block, which continues to provide it with a stable income.

The company stated that it expected the Covid-19 pandemic to impact its hotel and retail business for the rest of the year and management would be taking mitigating action.

However, there are no details as to measures they were planning.

Most importantly, there was not an inkling of idea if rental rates in Suria KLCC, which according to reports can be anywhere between RM25 and RM100 per sq ft per month, will be reduced.

In comparison, IGB Reit Bhd in its latest quarterly report, stated that it is looking at rental support programme on a case-by-case basis to mitigate the challenges faced by tenants.

In its action plan, the company, which operates the Mid-valley Megamall and The Gardens, stated that it was taking into consideration several factors such as business tolerance and risk of tenant sustainability when providing the rental support.

IGB Reit stated that its results would be impacted by the rental support programme and possible impairment in the value of its assets from the prolonged MCO.

From IGB’S statement, its obvious retail rental rates in its malls, which can be anywhere between RM20 and RM45 per sq ft, will be coming down.