PETALING JAYA (Jan 22): Considering the challenges faced by the Malaysian retail sector, more retailers are reviewing their business strategy including downsizing, said property consultancies Edmund Tie & Co (SEA) Pte Ltd and Nawawi Tie Leung Property Consultants Sdn Bhd
In November 2017, five Giant outlets closed down upon lease expiration as part of a consolidation plan, according to their “Kuala Lumpur Q4 2017: Retail sector was undergoing stress test” report.
“The five premises that were closed were located at Sri Manjung, Sungai Petani, Sibu, Selayang Lama and Shah Alam City Centre Mall. GCH Retail (Malaysia) Sdn Bhd asserted that the decision to discontinue the leasing contracts was made to improve efficiency and productivity.
“The company also owns three other brands, namely Mercato, Cold Storage and Jasons Food Hall. Other major retailers such as AEON and Tesco have implemented similar plans in 2017.
“The iconic Ampang Park, one of the oldest malls in Kuala Lumpur, closed down at the end of the year to make way for the construction of a new MRT station,” said the report.
However, not all is doom and gloom; the report noted that the retail scene in Johor Bahru received a shot in the arm with the opening of Paradigm Mall (NLA: 1.3 million sq ft) and an IKEA at Tebrau, the largest one in Southeast Asia, spanning an area of over 502,700 sq ft.
The new opening brings the number of outlets by the Swedish furniture giant in Malaysia to three, with its fourth – as well as its first ever in Malaysia’s northern region – poised to open in Batu Kawan, Penang, with an expected completion date in 2019.
According to the report, the upcoming retail supply in 2018 will exert further pressure to the rents.
“Nevertheless, Retail Group Malaysia (RGM) also projects a 6% growth rate in retail sale for 2018 but reaffirms that the recovery of the Malaysian retail market next year is highly dependent on the outcome of the general election, external economic demand and the ringgit’s performance,” it said.
In 3Q17, retail sales contracted 1.1%, compared with projections of 2.9% and 4% by the Malaysia Retailers Association (MRA) and RGM, respectively.
For 4Q17, MRA predicted a 3.8% growth. Total retail supply in Kuala Lumpur remained at 31 million sq ft with no new completion during the period, while occupancy rate remained at 87%.
Meanwhile, the Consumer Sentiment Index (CSI) fell to 77.1 in 3Q17 from the year-high of 80.7 in 2Q17.
“The recovery in 2Q17 was unable to sustain as the slide in retail sales coincided with the eroding sentiments amid escalating cost of living, especially in key cities such as Kuala Lumpur. Despite the quarterly decline, the CSI has moved up 5% y-o-y.
“Decline in sales was reported in all retail sub-sectors except pharmacy, personal care and other specialty retail stores, which recorded a 6% growth,” said the report.