PETALING JAYA: The industrial property sector will be the biggest beneficiary of the e-commerce boom, while the other real estate investment trust (REIT) sub-segments are likely to be severely affected by the current market glut.
Citing AREA Management Sdn Bhd executive chairman Datuk Stewart LaBrooy, CIMB Research said in a report that the industrial segment has a strong growth trajectory through acquisitions and organic growth, given the tight industrial space supply.
“The rapid growth of e-commerce, especially in Asia-Pacific, is creating new high-value assets that are now coming on stream,” said the research house.
It said the industrial segment is a highly under-invested sector, as stock availability remained tight while rental rates had been on the rise over the past two years (over 30%).
LaBrooy believes that demand for new high-quality industrial assets will transform the segment, which has led to several new mega-distribution centres that carry high price tags as retailers start turning to logistics.
“Notably, UK-based retailer Marks & Spencer is building a 900,000-sq-ft distribution centre with one million products processing capability per day and will consolidate its 110 warehouses into just four.
“Thus, LaBrooy believes there is a strong growth story through acquisitions and organic growth in the industrial segment, which will also be further propelled by the growth of the e-commerce segment.”
At the Malaysian Property Summit mid-year review 2016 last year, statistics showed that more than 20 million Malaysians, or two-thirds of the country’s population, are active Internet users. This high Internet usage is helping to fuel the boom in online shopping.
“As these online retailers grow, there will be an increase in demand for larger warehouses,” said an analyst.
The strength and growth in online retail can be seen following Lazada Malaysia’s Single’s Day event, which kicked off on Nov 11. The online shopping portal generated more than RM100mil in gross merchandise value.
Lazada Malaysia’s website and apps had about 10 million visits in a single day, representing a three-fold uplift versus 2016. At its peak, it recorded an estimated 1,400 transactions per minute.
Meanwhile, LaBrooy feels that the e-commerce boom will be a looming threat to retail malls, while the rapidly-growing office supply will continue to put rents under pressure.
To tackle the challenges faced by the retail REITs, malls are shifting towards providing more lifestyle and food and beverage offerings, as opposed to just brick and mortar, said CIMB Research.
Citing LaBrooy, it said retail REITs should set an e-commerce strategy in place.
“One possible way, he shares, is to amalgamate e-commerce with retail – using stores not only as a showroom or a retail centre but also as a mini distribution centre.
“He also believes that retail REITs should look into acquiring distribution and logistics centres, as this could create an end-to-end value chain for the consumers, all the way down to delivery.
“He, however, continues to see the larger and integrated malls in Malaysia outperforming their smaller, standalone counterparts.”