Group Managing Director Keith Ooi (centre) speaks during Knight Frank Malaysia's Real Estate Highlights 2024 Report at The MET Corporate Tower in Kuala Lumpur July 17, 2024. — Picture by Yusof Mat Isa
Weak consumer appetite for spending could weigh on the retail property sector for the rest of the year, with the addition of more retail spaces causing concern about a worsening glut, property consultancy Knight Frank Malaysia said today.
Rising manpower costs, electricity, rentals, along with increased sales and services tax and fuel subsidy cuts could add to existing pressure as consumers have already cut back on shopping.
Festivities’ spending in the first quarter of 2024 gave retailers some relief but was short-lived as persistent inflation and weaker buying power cause consumers to stay pessimistic, the property consultancy said in its January to June period review of the property market released this morning.
“Retailers are grappling with escalating costs across multiple fronts, including manpower, electricity, and rentals,” it said.
“The increase in SST rate to 8 per cent is heightening consumer caution, while fuel subsidy rationalisation is expected to inflate operational costs, potentially impacting sales revenue and necessitating price adjustments.”
This could weigh on rents although the firm was not clear about how much the problem would affect retail property owners’ revenue.
“The influx of new retail spaces could potentially soften rental rates and pose occupancy challenges for some established players,” the firm said.
“To navigate this evolving landscape, retailers and mall operators must adapt their strategies, focusing on creating engaging experiences, optimising tenant mix, and leveraging digital technologies to maintain a competitive edge.”
Still, most of Klang Valley’s major malls remain profitable.
Knight Frank said shopping icons in the capital city such as Suria KLCC and Pavilion Kuala Lumpur still command average monthly gross rentals of RM41 per sq ft and RM30 per sq ft. These malls enjoyed commendable occupancies of 96.0 per cent and 95.2 per cent respectively.
Meanwhile, Mid Valley Megamall and The Gardens Mall command average monthly gross rentals of about RM18 per sq ft (2022: RM17 per sq ft). The occupancies of these malls remain high at approximately 99.9 per cent.
But a growing tourism sector, coupled with the impact of Employees Provident Fund (EPF) withdrawals, strong labour market and the planned increase in civil service wages are expected to somewhat bolster private consumption, giving the retail property some optimism, the firm said.
“While geopolitical tensions, inflation, and financial conditions remain concerns, the medium-term sustainability of demand will hinge on fundamental drivers such as demographics, labour market dynamics, and income growth across various segment,” its report said.
Source: malaymail.com
Comments