‘Shopping traffic will decline by up to 50 pct

Malaysian Institute of Professional Estate Agents and Consultants (MIPEAC) president Francis SP Loh who agreed with the assessment said, comprehensive shopping malls which are centrally located and well-managed would retain their patrons and continue to be successful.

According to the Retail Group Malaysia (RGM), it is estimated that shopping traffic will decline by up to 50 per cent and the retail industry is expected to post a 18.8 per cent year-on-year contraction for the first quarter of 2020.

RGM had projected the Malaysia retail industry to grow by 4.6 per cent in 2020 at end-2019.

However, the situation had since deteriorated significantly as prolonged Covid-19 pandemic and falling domestic demand would see the retail industry suffer a 5.5 per cent contraction for the rest of this year. For the short term, Loh said office space would see less demand as compared to before Covid-19 pandemic.

Rentals of office space would also be affected, resulting in the corresponding drop in the market values of office space.

As people adapt to the new normal, businesses and companies are considering downsizing whenever they could due to online initiatives and lower business volume.

Loh said smaller and less centrally located shopping malls would be most affected and may have to look at conversion to other possible types of usage.

According to the National Property Information Centre (NAPIC) website, the country has 1,037 shopping complexes as in the first quarter of 2020, with a total space of 16.54 million square metres.

On a more specific level, certain sub-sectors of the retail segments would experience a decline, including entertainment centres such as theatres, which may go bust as more people watched movies from the comfort of their homes while filmmakers opted to release their movies online.

Due to the pandemic, departmental stores may also suffer as it is being replaced by online purchases, giving a boost to the online industry, especially on essential household items.

Additionally, co-working or flexi working space enterprises which experienced a rise in demand prior to the pandemic would also see a decline and a corresponding reduction in demand for office space.

NAPIC showed that as at the first quarter (1Q) 2020, the total occupancy rate of office space in the country stood at 74.9 per cent.

Preliminary data from 1Q20 showed the value of transactions for commercial sub-sectors was RM5.112 billion, against RM6.758 billion and RM8.383 billion in 1Q19 and Q4 2019, respectively.

Commenting on issues on rental, Malaysia Retail Chain Association president Datuk Seri Garry Chua hopes the government and landlords could defray rental costs to help tenants and justify all the costs they would have to cover to at least 50 per cent due to lower sales volume. This is because of the lesser traffic flow and social distancing.

On the other hand, he welcomed the move by some property owners like in Sunway, Mid Valley and Bangsar Village which have announced rental discounts of 70 per cent based on their gross turnover (GTO).

Apart from that, he also noted that most retailers were unable to get bank loans and were struggling with issues of cash flow.

Although they have enough assets, the lack of liquidity impose a challenge to pay salaries, restructure payments within the supply chain and so on, he said.

Meanwhile, the industrial sector was doing quite well relative to the other sectors with demand for warehousing space, in particular, would see an increase in line with the upsurge in e-commerce.

According to NAPIC, the industrial sub-sector recorded RM3.186 billion in terms of the value of the transaction in 1Q20, from RM4.174 billion in 1Q19 and RM4.689 billion in Q4 2020.

Meanwhile, there were 127,604 units of residential units launched in 1Q20, out of which 29,698 were unsold units with the value stood at RM18.9 billion.

Loh said the residential units would have a weaker effective demand in the short term due to the loss of jobs and the increase of unemployment which would see prices probably take a dip.

Nonetheless, before the pandemic, there was already an overhang of residential properties largely a ributable to the higher-end segments particularly in service apartments and high-end condominiums.