For continued success, retailers and stakeholders are expected to embrace new retailing dimensions, says expert
By HARIZAH KAMEL / Pic By HUSSEIN SHAHARUDDIN
MALAYSIA’S property market is expected to endure another challenging year as political uncertainty drags on and movement restriction orders are reimposed, according to Knight Frank Malaysia Sdn Bhd.
Its latest research report for the second half of 2020 (2H20) stated that the recent spike of Covid-19 cases, which led to the reimplementation of the Movement Control Order (MCO), will likely derail market recovery in the short term.
Knight Frank Malaysia MD Sarkunan Subramaniam said the performance of the residential market is very much dependent on how the economy moves forward.
“The anticipated commercial rollout of the Covid-19 vaccine by 1H21 will certainly boost hopes for economic recovery and lift overall consumer sentiment.
“However, ongoing political uncertainty amid the worsening Covid-19 crisis has forced property buyers and developers to rethink their plans and strategies. The residential market is expected to remain challenging in 1H21,” he said.
The hospitality and retail industries continued to face disruptions and challenges in 2H20, as selected retail outlets and hotels nationwide suffered closures.
“2020 will always be remembered as a disruptive year, and the third wave of infections in selected key cities has weakened the recovery momentum in the retail industry.
“For continued success, retailers and stakeholders are expected to embrace new retailing dimensions by keeping pace with changes in consumer behaviour, patterns and market dynamics,” Knight Frank Malaysia ED Keith Ooi said.
With Covid-19 remaining as a key concern in 2021, occupancies and rents for the retail sector are expected to decline moderately this year.
However, Ooi anticipates the value of prime grade retail assets to remain relatively stable despite the rental decline, given their more resilient tenant and lease profiles, while yields will be buffered by the existing low interest-rate environment.
Knight Frank Malaysia ED of capital markets James Buckley is optimistic that international tourists will begin to return in 2H21 as the vaccine is being rolled out globally, but it is likely to take some time to recover to pre-pandemic levels.
“Shrewd investors who are confident in their analysis and recognise the market cycle will see this period as an opportunity to acquire quality prime assets which will retain value.
“In 2021, we expect some good quality prime assets to trade,” he said.
Demand for office space has weakened throughout the pandemic as more companies and corporations review or postpone their real estate decisions to strike a balance between driving growth and maintaining operational and cost-efficiency.
Meanwhile, Knight Frank Malaysia ED of corporate services Teh Young Khean said the pandemic will potentially switch the workplace trend from a centralised model to a virtual model in the future.
He said organisations that have been adopting hybrid working models since the start of MCO may find this model beneficial and consider it as a go-to model moving forward.
“The office is here to stay with a tweak to its purpose. We will also see enhanced office quality and better floor configuration where health and safety will remain top of mind for occupiers,” he said.
Buckley noted that investors in Kuala Lumpur (KL) have shied away from buying second-hand office space, which comes with more risk as tenants relocate to new and better quality office accommodation.
These second-hand buildings are finding it hard to compete for tenants who are upgrading to new offices in KL city and KL fringe locations, while older office buildings will see their prices continue to soften and repurposed in some cases.
Meanwhile in Penang, the office sector occupancy continued to remain strong with the average occupancy rate for four prime buildings monitored in George- town remained at 89%, while the average occupancy rate in the state continued to hold steady at 78.2% as of 3Q20.