Pressure on retail outlets, incoming space may affect tenancy and rates

Incoming supply of retail space into the Malaysian property market this year is expected to create pressure on existing outlets looking to maintain their tenancy and rental rates.According to property consultant CH Williams Talhar & Wong Sdn Bhd, retail space is expected to increase by 6.4m sq ft this year. "This is expected to mount significant pressure on existing shopping centres to keep tenants," it said in its 2014 property market report. It added that new supply this year would likely see vacancy rates rise compared with the previous year.

• "Vacancy has historically hovered around 9% to 11% over the last five years and 2013 has been a stable year for retail centres in the Klang Valley. Average vacancy dropped marginally to 10% from 11.4%," the report said. 
• According to the report, average prime retail rents maintained a steady growth trend with a 10% increase year-on-year in 2013 to RM22 per sq ft compared with RM20 per sq ft in 2012.  "The prospect for retail rents accretion for secondary malls, however, is coming under increasing pressure from an increasing number of incoming retail centres over the coming years." 
• It said an analysis of real estate investment trust-owned malls in the Klang Valley revealed that prime shopping malls' net yields had continued to be compressed to the 4.4% to 6.2% range while gross rents yields ranged between 6.2% and 9.4%. (Starbiz)