RENTAL rates at shopping complexes within the Klang Valley are expected to remain stable for the remainder of 2014, as the market is anticipated to see healthy growth in retail space this year.
According to property consultant CH Williams Talhar & Wong Sdn Bhd (WTW) in its retail sector report on the Klang Valley, some 4.88 million sq ft of net lettable area of space is expected to come in later this year.
The future supply will be from Quill City Mall (formerly Vision City), Capsquare Mall, Sunway Putra Mall (formerly The Mall), The Atria Shopping Mall, Sunway Velocity Mall, Sunway Pyramid Phase 3, M Square Shopping Mall, IOI City Mall and D’Pulze.
“The general market is anticipated to observe a healthy growth with spaces within the newly completed malls slowly to be filled up, as well as most upcoming retail centres in 2014 expected to be completed only in the second half of 2014. Rentals, on the other hand, are also expected to remain stable,” says WTW.
Citing the Malaysia Retail Industry Report, WTW noted that despite the festive season celebrations in the first quarter of 2014, the period registered slower sales at 4.8% as compared with a 7.5% growth for the same period in 2013.
“Nevertheless, with the vision of better incomes, higher employment rate and moderate inflationary as expected and reported by the Malaysian Institute of Economic Research (Mier), consumers are expected to indulge in more spending, especially with the continuously strong domestic market.
“Concerns were over higher growth in quit rent and assessment expenses, coupled with the increase in electricity tariff and renewable energy surcharge resulted, however, in higher property operating expenses, outpacing that of revenue,” WTW says.
According to Mier’s retail trade survey report, the Hari Raya celebration was expected to drive up retail sales in the third quarter of the year.
It, however, pointed out that the increase in the overnight policy rate (OPR) could affect retail sales of bigger items.
“The highest growth in retail sales is expected to come in the final quarter of 2014 due to the year-end school holidays and festive season. Furthermore, consumers may spend more before the goods and services tax (GST) comes into effect in April 2015,” Mier says.
Mier also noted that several negative news recently, such as the OPR hike and the downing of flight MH17, would have an impact on the local retail sector.
“But the increase in the OPR may affect retail sales of bigger items. The highest growth in retail sales is expected to come in the final quarter of 2014 due to the year-end school holidays and festive season.
“Furthermore, consumers may spend more before the GST comes into effect in April 2015,” it says.
Citing the Mier report, WTW points out that Malaysia continues to be an attractive investment destination, as the local retail market is expected to remain strong and attract international retailers, especially with rumours of expressions of interests by the French departmental store Lafayette and Japan-based Takashimaya Co Ltd.
Malaysia Retail Chain Association immediate past president Datuk Nelson Kwok believes that things will be looking up for the local retail sector in the second half of the year.
“In terms of performance, the second half will always be better than the first, mainly because there are more festive holidays in the later part of the year.”
On the GST, he says some people might be tempted to purchase goods early to avoid the higher tax.
Kwok, meanwhile, believes that the recent aviation tragedy might only have a near-term impact on the local retail sector.
“It will subside. Malaysia is still a very attractive destination to shop, compared with other nearby countries.”
In the first quarter of 2014, WTW said overall occupancy rates of the Klang Valley retail space remained stable at 89%, despite a marginal drop of 0.1% from the previous quarter.
~ By THE STAR
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