The Star: 17 September 2007

THE strong demand for retail space will continue to accelerate and industry players can look forward to much better performance in sales, occupancy and rentals.  

Zerin Properties head of investment Francis Quah said that in spite of the opening of three new shopping destinations next month - The Pavilion KL (with net lettable area of 1.4 million sq ft), Sunway Pyramid Annexe (800,000 sq ft) and The Gardens (800,000 sq ft) – the retail property market was expected to remain strong with rentals and occupancy in the prime city centre and suburban malls set to rise further. 

“We expect the market to be bullish, with growth in retail spending that will result in higher rentals and capital values,” he said. 

The strong economy, a young population, urban migration, and high tourist arrivals of 20 million expected this year would spur the market further, Quah said. 

Malaysian Association for Shopping and Highrise Complex Management (PPK) president Joyce Yap said high-end retailers had forecast sales growth of 8% to 15% while the mass-market brands were optimistic of growing at between 15% and 30%. 

“While rentals are generally expected to remain stable, quality shopping centres should be able to chalk up rental increases of 10% to 20% when the leases come up for renewal these one to two years,” Yap said. 

Sunway City Bhd managing director (property investment) Ngeow Voon Yean said the take-up rate for retail space in shopping centres was better in greater Kuala Lumpur than in other parts of the country, especially for the successful mega-centres with net lettable space in excess of 1 million sq ft. 

Malls such as Sunway Pyramid, Suria KLCC, Mid Valley, and 1 Utama, are enjoying full occupancy. 

The rest of the medium-sized and well-managed shopping centres, including Bangsar Shopping Centre, Leisure Mall, Subang Parade and Sungei Wang Plaza, are enjoying close to full occupancy.  

The occupancy rates of other shopping centres in the Klang Valley average around 80%. 

Given the rising occupancy and rentals of retail space, there is a growing interest among institutional investors, including foreign groups, in the local retail properties. 

Recent announcements of acquisitions by foreign parties indicated their strong interest and confidence in the growth and performance of Malaysia’s retail property industry.  

Ngeow said the acquisitions by the foreign groups mostly focused on the less successful malls where the purchasers could value add in terms of proactive shopping mall management expertise and the introduction of new shopping mall trends from overseas.  

“This increased competitive landscape will further boost the quality of shopping malls in the country,” he said. 

Most noticeable is the purchase of Gurney Plaza and Mines Shopping Fair by Capitaland.  

CapitaLand will pay RM770mil for Gurney Plaza in Penang and RM430mil for Mines Shopping Fair.  

The Singapore real estate group has identified other quality Malaysian retail assets that will augment Gurney Plaza and Mines Shopping Fair, and form the pipeline of assets for a pure-play Malaysian retail real estate investment trust (REIT), which could possibly be listed within a year. 

Ngeow said the birth of REITs had also spurred foreign interest in local retail properties as it allowed foreigners to own units in the local retail industry and to benefit from the industry's growth without a large upfront investment in an entire shopping mall.