IN light of the sluggish property market currently, retail-focused Hektar Real Estate Investment Trust (Hektar REIT) is concentrating on improving the malls within its portfolio to adapt to the changes in the industry and remain competitive.
Hektar Asset Management Sdn Bhd executive director and chief executive officer Datuk Hisham Othman says the key to success for shopping centre operators is understanding the market that they are in and adapting to the needs and wants of their customers.
“For shopping centres, our customers are both the shoppers as well as our tenants so it is highly important to know the right approach to please both customers,” he says in an e-mail.
“We chose to focus on customer engagement exercises and on-site experiences to increase dwell time and repeat visits, which we believe will encourage higher spending.”
Hisham says Hektar REIT is also concentrating on creating and maintaining retail environments that are favourable for consumers and retailers.
“We have been improving the aesthetics and carrying out internal works to increase the value of our assets and make our place more attractive for our customers.”
He says the company tries to bring in new experiences to its shopping centres based on market intelligence on its customers.
“We will continue to see the emergence of themed retail zones, new food concepts and new categories in entertainment such as edutainment.
“We expect interactive digital gyms to make an entrance in Malaysia, following their recent global appeal, and we seek game changing concept providers such as this.
“We believe that shopping centres need to collaborate with developers and retail operators to bring exciting new experiences to consumers.”
On its plans going forward, Hisham says Hektar REIT is looking to acquire new malls and boost its portfolio.
“We are constantly on the lookout for acquisition opportunities. However, the properties have to meet our key investment criteria before we can proceed with our consideration.
“Our target is to double our portfolio size in eight years’ time (from RM1.2bil to RM2.4bil by 2026) so we will continue to explore. Our strategy is to locate and penetrate into under-served areas within the country.
“We believe there are still many untapped opportunities in Malaysia as there are more than 50 cities and municipalities in Malaysia with a sizeable population. We will continue to focus on the neighbourhood and community centre segments but not limit ourselves to other types of malls.”
Hisham says the company is targeting neighbourhood malls in developing towns with a minimum population of between 150,000 and 200,000 people.
Hektar REIT, which was listed on the Main Market of Bursa Malaysia on Dec 4, 2006, currently owns two million sq ft of retail space in Selangor, Melaka, Johor and Kedah, with assets valued at RM1.2bil as at Sept 30, 2017, with a healthy 92.9% overall occupancy.
The company’s portfolio of shopping malls include Subang Parade, Mahkota Parade, Wetex Parade, Central Square, Kulim Central and Segamat Central. Hektar REIT recently received the Gold Award under the Retail REIT category at the Asia Pacific Best of The Breeds REITs Awards 2018.
Hisham says the company is currently planning upgrading and enhancement works on its Segamat Central and Subang Parade malls.
According to reports, some six million sq ft of net lettable space from more than 10 malls is expected to enter the Klang Valley retail market in the second half this year, raising concerns of added pressure on occupancy levels for both existing and incoming stock.
According to property consultancy Knight Frank in its Real Estate Highlights report, the recent completion of around 450,000 sq ft of net lettable retail space brings Klang Valley’s cumulative supply to 57.5 million sq ft in the first half.
Recently, Retail Group Malaysia (RGM) has revised its 2018 retail sales growth rate forecast to 4.1% from 5.3% previously.
Citing RGM, Hisham notes that the change in ruling party after the general election has boosted consumer’s confidence level and increased their willingness to spend during the three-month tax holiday from June 1, earlier this year.
“However, generally market analysts are anticipating a mixed impact with the reintroduction of sales and service tax. Although food and beverage and the retail category would enjoy slightly lower prices, other categories such as services would see increasing prices.
“Overall, the feel is that with the changes set to be made this year, customers’ sentiment will likely improve,” he says.
Hisham believes that shopping centres will remain as the preferred destinations for entertainment, social activities and shopping amongst Malaysians as long as they remain relevant.
“Successful shopping centres of the future are those that have an intimate understanding of consumer wants and needs, given their evolving lifestyle and those that embrace rather than shy away from disruptive technologies - in a way that they successfully position themselves to be complementary rather than detached from these technologies.”
He emphasises that market leaders shall be those that invest in and deploy cutting edge technology in adapting to, if not influencing, spending patterns.
“Mall managers as well as retailers, as their tenants, need to change their strategies and be more aggressive in finding ways to meet the needs of consumers, particularly those from the younger age group who are now more discerning, in driving sales.
Understanding consumers’ needs, buying psychology and spending habits is crucial to the survival of shopping centres and their stores.”
Hisham says marketing strategies are also evolving, with retailers also adapting to the changes in the competitive landscape through refining their touchpoints with consumers.
“Retailers today, from luxury brands to casual, not only reach out to their audience through innovative non-traditional channels, but are also active in collaborations amongst brands, as well as between brands and social influencers.
“In conclusion, we believe that the retail market outlook will improve in the second half though it will still be challenging in the face of disruptive technologies, changing consumer mindset, increasing competition and global market uncertainties.”
He, however, adds that there are still opportunities for growth in Malaysia, as there are still many underserved and untapped markets to explore.
“The key to survival is to constantly be aware and be willing and quick to adapt to changes in the market.”