AFTER two years of grave uncertainty following the Covid-19 pandemic, Malaysia’s badly affected commercial real estate market is hopeful that 2022 will finally be a year to look forward to.
Sunway Malls and Theme Parks general manager HC Chan said the reopening of international borders from April 1 is a welcome move for the market.
“With the clearly marked date of April 1 being the transition to endemicity, this sends an important psychological signal that we are returning to normality.
“Most importantly, it creates certainty, which is important for businesses to thrive, compared to the past two years.
“The reopening of international borders is a welcome move as it will allow Sunway to welcome international arrivals again,” he told StarBizWeek.
On March 8, Prime Minister Datuk Seri Ismail Sabri Yaakob announced that Malaysia will reopen its borders from next month as it seeks to revive the country’s economy, particularly the tourism industry, which has been severely damaged. affected by the Covid-19 pandemic.
In light of this, Chan is optimistic that the second quarter of 2022 will be a period of strong sales for the local retail sector.
“We expect the second quarter to be strong with the Hari Raya festivities contributing to a significant improvement, given that the balik kampung exodus is permitted after two years.
“For this reason, we anticipate that this will result in significant festive spending.”
Chan adds that interest rates should also be accommodative for the first half of the year.
“The withdrawal of the RM10,000 employee provident fund, to some extent, will allow some flexibility and stimulate more discretionary spending.
“Overall, we expect the second quarter of 2022 to be quite solid and robust, provided there are no serious derailments.”
For the first quarter of 2022, Chan says performance was better than expected.
“On a month-to-month basis, the recovery of Sunway shopping centers in January 2022 reached 120%, surpassing pre-pandemic levels.
“He was primarily driven by strong and consistent holiday buying throughout the four weeks, as opposed to the past two weeks when holiday buying momentum is strongest.”
Chan says the Omicron wave, which saw daily cases rise in the second week of February, had a dampening effect on the local retail sector.
“But the effect on Sunway Malls was less severe than expected. Allowing for the period of low seasonality, we managed to reach 85% of our sales levels despite daily cases reaching 30,000.”
Despite the spike in cases, Chan says the healthcare system was not strained and economic activities were still allowed to resume.
“We expect activity to reach 95% normality in March, given Omicron’s gradual easing of infectiousness.”
Meanwhile, Retail Group Malaysia (RGM), in its latest report on the retail industry in Malaysia, says it expects a growth rate of 6.3% for the local retail sector for 2022. .
“This is an upward revision from its estimate made in November last year at 6%. Malaysia’s retail industry is expecting a strong recovery as it enters the third year of the Covid-19 pandemic. However, many challenges remain to be met in this new year.
RGM notes that the Omicron wave has disrupted the pace of retail recovery in Malaysia.
“Based on the development of Covid-19 in recent weeks, the retail market outlook has again become uncertain.”
When daily positive cases peaked at 20,000 on Feb. 11, RGM said Malaysian consumers began to be wary of the high possibility of virus infections.
“Although major malls across the country are still crowded on weekdays and weekends, car traffic begins to gradually decline as daily cases hold above 20,000 cases.”
RGM says the high number of daily positive cases and rising hospitalization rates remain worrisome.
“This fourth wave virus pandemic is haunting Malaysian retailers again.”
Additionally, RGM claims that the delay in opening international borders for all countries has affected the arrival of foreign tourists to Malaysia.
“Current entry requirements for foreign tourists to Malaysia are inconvenient and discourage leisure travelers from overseas countries. This has affected retail businesses that relied on leisure travelers from other countries.”
Separately, RGM says prices of basic necessities and many consumer goods have risen since the end of last year.
“Many food and drink outlets have also increased their prices. Price increases are expected to continue in the first half of 2022.
“Furthermore, oil prices have been rising in recent weeks. The rising cost of living will affect the purchasing power of Malaysian households in the new year.
RGM says that potential increases in short-term interest rates will also have a negative impact on the purchasing power of Malaysian consumers.
“The war in Ukraine will affect the supply chain of consumer goods worldwide.
“This surprising war will also lead to even higher oil and commodity prices,” he says.
For the first quarter of 2022, RGM says the Malaysian retail industry is expected to see strong growth of 16.5%, due to the Chinese New Year festival and further relaxation of standard operating procedures.
“The Malaysian retail industry is expected to grow by 4.2% in the second quarter with the contribution mainly from Hari Raya.
“The third quarter growth rate is estimated at 3.4%, due to a weak base in the same period a year ago. By then, Malaysia should have started its endemic phase of Covid-19. »
For the last quarter of 2022, RGM expects the Malaysian retail industry to register growth of 3.6%.
According to Knight Frank Research’s real estate highlights for the second half of 2021, the commercial real estate market in the Klang Valley has returned to some semblance of normalcy as it enters phase four of the recovery plan. nationwide on October 18, 2021.
“The long-awaited reopening of the economy and the lifting of interstate travel restrictions have provided relief to the hard-hit retail sector.
“Due to the impact of Covid-19 on the retail sector following interminable and unprecedented periods of confinement, the recovery of the sector is expected to be gradual.”
Knight Frank Research says the drought in business operations during the extended lockdown has also led to the inevitable closures of local and international brands.
“Combined with the incoming supply of retail space and the changing retail landscape, rental rates and occupancy levels in the Klang Valley are expected to be under pressure.”
He adds that the government has stepped up its efforts to help businesses migrate online, as the lack of e-commerce and online marketing skills has proven to be a major barrier to entry.
“New optimism for the recovery of the retail sector is threatened by Omicron, the new variant as the retail recovery is largely synchronized with the number of Covid-19 cases and its subsequent restrictions,” says Knight Frank Research.
Despite 150 days of lockdown in 2021, Chan says sales and traffic levels for Sunway malls returned to 100% in the fourth quarter of 2021.
“Strong pent-up demand, the festive season, high percentage of fully vaccinated individuals and declining daily Covid-19 counts were among the key drivers of the recovery at the end of 2021.
“Improving consumer confidence has also paved the way for better spending, thanks to improving labor market expectations,” he said.
