PETALING JAYA: The retail property sector is still looking resilient despite the current market glut, in line with the performance of retail-based real estate investment trusts (REITs).
AmInvestment Bank, having attended Rahim & Co’s property seminar last week, concurred with the consultancy firm’s findings that the local retail sector is looking positive.
“The speakers are of the view that the outlook for retail properties, mainly shopping malls, will remain resilient in the short to medium term.
“This is consistent with REITs under our coverage, namely Pavilion REIT and Sunway REIT whereby both have a high occupancy rate in their shopping malls,” the research house said in a report recently.
AmInvestment Bank noted that the Malaysian Institute of Economic Research’s Consumer Sentiment Index (CSI) retreated to 107.5 points in third quarter of 2018, after a spike to a 21-year high of 132.9 points in the second quarter of 2018.
“The trend implies that consumers are still optimistic but remain cautious and selective in spending plans.”
Separately, it said the demand for industrial properties will be driven by the logistics and warehousing segments, which are largely supported by the emergence of e-commerce.
“The preference of logistic warehouses will likely continue to be within the Klang Valley, largely in Shah Alam, where there is a large concentration of manufacturing activities and distribution centres.
“Meanwhile the outlook for the office sector will be negative in the medium term due to oversupply as 20 million sq ft of additional office space in Greater KL (presently 123 million sq ft) are targeted for completion in the next four years while market absorption remained lagged.”
The research house noted that KL city will experience the greatest impact, with 9.7mil sq ft scheduled for completion in the next three-to-four years.
“Yields are under pressure as a result of higher construction costs and weaker rents.”
Citing the speakers at the seminar, AmInvestment Bank said the residential market will begin to turn positive in 2019, driven by the feel-good factor after the recent general election (GE14); the implementation of new policies in Budget 2019; and a stable economic outlook.
“Affordable housing remains one of the key priorities of the government. The extension of step-up financing for the lower income group will improve investor sentiment on the sector, especially for developers with more exposure to the affordable housing segment.”
The research house said The outlook of the property sector has been uncertain since GE14, as developers deferred their new launches while buyers held back their purchases.
“Now with a clearer political landscape accompanied with the government’s initiative to address the challenges in the property market as proposed in Budget 2019, we believe the situation will improve in the long term,” AmInvestment bank said.