Retail industry to face challenging but encouraging 2014
The Malaysian Retail Chain Association is optimistic that retail sales will grow at 6.2% in 2014 due to upcoming events like the World Cup, Hari Raya and Christmas, as well as the Visit Malaysia campaign. However, according to Retail Group Malaysia (RGM), retail sales in Malaysia saw a lower 4.9% growth in Q1 compared to 7.5% in the same period last year. This is in line with the current Consumer Sentiment Index that remained below the 100-point confidence threshold. Consumer spending in Q1 was mostly backed by the Visit Malaysia campaign, back-to-school events, New Year sales and the Chinese New Year season.
Factors such as the rising cost of living, subsidy rationalization, electricity tariff hikes and a rise in property tax pose challenges to the industry, but are not expected to be severely detrimental to retailers. The demand for essential goods remains steady. Notwithstanding, the OPR is expected to rise in H2, and could affect retail sales of big-ticket items.
Pressure on retail outlets
Existing secondary malls could struggle to maintain their current occupancy levels and rental rates due to a pipeline supply of approximately 4.5 million sq ft in both the city and suburban areas in H2 (Figure 5). Malls that are expected to be completed include M square Shopping Centre, D’Pulze, Empire City, Sunway Putra Place, Atria Shopping Mall and IOI City Mall (Table 1).
Retail space, especially in lifestyle malls, will become increasingly competitive as numerous new mixed-use developments have incorporated retails centres as key components.Neighbourhood malls required niche positioning amidst increased competitionWith the increased level of competition for tenants, retail malls require niche positioning for sustainability. The proliferation of neighbourhood malls has meant that to survive, these malls have to be able to cater to the needs of local residents. Some examples of neighbourhood malls in Klang Valley include Jaya One, Jaya Shopping Centre, Bangsar Village and Citta Mall. These malls provide services such as supermarkets for grocery shopping and eateries that cater to the nearby residents. Therefore, these smaller malls are relatively well-occupied despite concerns on the oversupply of retail space.
Meanwhile, the supermarket scene is becoming more diverse following the entry of new retailers. One of these is Lulu International Group, a Dubai-based retailer and a large regional player, is entering Malaysia via a joint-venture with Felda. They have has committed to opening six hypermarkets in the coming years.
- By DTZ Research
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