Rental rates at malls still holding up despite sluggish market

Mid Valley Southkey Megamall

PETALING JAYA: Rental rates at some of the biggest shopping malls in the country are still holding up despite concerns about sluggish retail sales.

This, analysts said, was good news for commercial real estate investment trust (REIT).

Stocks such as IGB Real Estate Investment Trust (IGB REIT) have seen spurt of buying interest of late bucking the overall sombre mood on the broader stock market.

Amidst a weaker market of late, IGB REIT’s shares have held strong holding at near three-year highs and closed yesterday at RM1.42.

IGB REIT owns Mid Valley Megamall and The Gardens Mall in Kuala Lumpur.

After a lull year, the REIT had found a renewed upward catalyst and as it surprised investors that it was still able to command strong rentals in its malls.

This is despite a strong counter trend of e-commerce or online shopping which has lured shoppers both young and old.

“This indicates that in some sectors, there is still a preference for the old established way of doing things. For certain items such as clothes or even shoes, sometimes the quality or size cannot simply be ascertained through measurements or claims on a certain website,” a consumer analyst said.

Observers said that some malls still provided good bargains for consumers during the tough year of 2015 and some of these bargains could even be better than what is found on the online shopping portals.

“Bear in mind that prices at some online shopping portals will also include the cost of delivery and the cost of inventory storage at the warehouses. Manpower costs to facilitate such services are also included. The cost structure could be similar to the malls,” he added.