Retail malls face uphill task finding tenants, says RGM

Izzat RatnaTuesday, March 21, 2017
Tan notes that the retail industry is heading for another tough year as confidence worsened and the outlook remains murky (Pic by Muhd Amin Naharul/TMR)

The occupancy rate at malls in the Klang Valley is expected to deteriorate further this year as shoppers continue to tighten on their spending coupled with the overbuilding of such facilities.

Retail Group Malaysia (RGM) MD Tan Hai Hsin said the majority of the new shopping centres that opened last year only achieved about a 20% to 50% take-up rate.

“That is expected to continue this year. There are a lot of vacant spaces in prime areas within the Klang Valley. It is a testament that consumers’ purchasing and buying power is very low,” he said at a media briefing in Kuala Lumpur yesterday.

Tan also forecast that many shopping centres — including grade-A malls — will be affected by the challenging sentiment.

He said the retail industry is heading for another tough year as confidence has worsened and outlook remains murky.

“People are still worried about their jobs, salaries and the possibility of retrenchment.

“Based on our data, when the sentiment is low, the next quarter’s retail sales and occupancy rate will further decline,” he said, adding that retail occupancy would suffer another 3% to 5% drop this year.

The retail industry has already been on a tailspin since 2014 and confidence has been almost unchanged over the last three years.

Tan—who is also the MD of Henry Butcher Retail — said the stronger greenback has made imports more expensive and costing products 20% to 30% more.

“Retailers are unable to keep absorbing the additional costs — whether it is the food distributor who supplies to supermarkets, a retailer who imports for themselves, or a franchise who gets overseas supplies.

“This has left them with no choice but to pass the rising cost to customers in order for their businesses to weather through this storm,” he pointed out.

However, Tan does not expect any drastic price hikes for products and services within the next three months as the ringgit has stabilised.

Meanwhile, he said the 2017 retail sales figure is revised down to 3.9% from 5% due to the poor performance in the final-quarter of 2016 (4Q16) and 1Q17.

“At the moment, we are not so optimistic on the performance for this year as the economic environment is not as good as we expected,” he stated.

On e-commerce, Tan said the industry remains small compared to overall industry.

He commented that the digital industry will require some time to grow from its present 2%, or RM2 billion, in sales value last year.

“No matter how fast the revolution is, it takes a while to catch up as the retail industry is also growing at a smaller rate.

“The double-digit growth in e-commerce recorded in 2016 is not sustainable as even more developed nations are growing at about 15% on average,” he added.

According to the Ministry of International Trade and Industry, e-commerce in Malaysia is projected to grow at an 11% compound annual growth rate by 2020 and the national e-commerce strategic roadmap is expected to double its contribution to RM211 billion from the business as usual of RM114 billion.

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