Retail, hotel REITs to record steady recovery
KUALA LUMPUR: Steady recovery has been projected for both the retail and hotel segments. driven by relaxation of the Movement Control Order (MCO), while analysts believe the office and industrial segments will continue to remain stable.
When inter-state borders eventually reopen, the research arm of Hong Leong Investment Bank Bhd (HLIB Research) expects a gradual respite from domestic holiday-goers as well as business travelers; this should aid recovery in occupancy for hotels.
“With the government allowing interstate travel activities between Recovery MCO (RMCO) states (March 10), hotel occupancy rates were seen to increase to 33 per cent from the lower rates in January (20 per cent) and February (18 per cent),” HLIB Research said.
The research arm also foresees continuous improvement in the retail segment aided by relaxation of restrictions and pent-up local demand backed by “revenge spending” and upcoming festive season for Hari Raya.
This former effect was witnessed during last year’s RMCO (June 10 to October 12); as its current footfall of malls have recovered close to RMCO levels, based on the research arm’s channel checks.
“Moreover, the continuation of 10 per cent electricity tariff rebate (till June 2021) would aid in reducing of operating costs. While rental assistance would still be given to affected tenants, as we understand the quantum is reducing.
“Furthermore the national vaccination program, which should gain significant traction in the second half of 2021 (2H21), would drive up overall sentiment as we progress on the path to normalcy.”
Meanwhile, HLIB Research projected that the office and industrial segments will remain resilient.
As the economy slowly recovers, in addition to the vaccine roll out plan, the research arm expects more employees to gradually return to office with fewer on working from home (WFH) arrangements.
“On that note, we expect the demand for office space to remain resilient for the rest of the year.
“Meanwhile for industrial real estate investment trusts (REITs), the segment has been steady all along, backed by exceptional growth of the e-commerce sector that was seen during the pandemic.
“We observed that as online shopping becomes the new norm, it has created a strong tailwind for warehousing and logistics companies.”
Hence, HLIB Research believes industrial REITs will continue its stability and growth trajectory in 2021.