Malls that have the edge during pandemic in Johor

Today's Mall in Ulu Tiram is a new shopping mall for residents there.

PETALING JAYA: Matured malls within prime locations in Johor are most likely to persevere and better-withstand the adverse effects of the Covid-19 pandemic, property consultants said.

CBRE|WTW director Tan Ka Leong (pic below) said the retail sector in Johor had been badly hit by the Covid-19 crisis, especially in Iskandar Malaysia.

“The retail businesses and services in Iskandar Malaysia are strongly supported by Singapore residents, who used to do weekend shopping there, ” he told StarBiz.

With the movement control order and circuit breaker by the Malaysian and Singapore governments respectively, most of the retailers have been severely affected, added Ka Leong.

“Matured malls in prime areas with higher rentals may see some tenant movement, especially non-chain local retailers. Meanwhile, new malls may be confronted with rigorous challenges to survive and overcome this pandemic.

“Existing malls in sub-prime areas may see increasing vacancy rates and new malls could expect difficulty in securing tenants.”

Ka Leong said the retail sector of Iskandar Malaysia is not only facing challenges from the Covid-19 pandemic, but also stiff competition from other retail players.

“This is due to large supply of space that had come into the market in the last two to three years.

“Fewer new tenants, higher vacancy rates, lower rental rates and longer rent-free periods are expected for the retail sector of Iskandar Malaysia in 2020.”

KGV International Property Consultants (Johor) Sdn Bhd executive director Samuel Tan said the Covid-19 crisis has changed the entire landscape for consumers’ future shopping experience.

“The requirement for social distancing and other healthcare concerns will derail any immediate recovery of the retail market. Any improvements will be progressive and measured over half to one year.

“The decreased footprints due to the completion of some malls will add pressure to this sub-sector.”

Samuel said mall owners will attempt to retain good tenants by offering rebates.

“Many will have to resort to profit-sharing with a base rental. This arrangement will mitigate fixed cost to the tenants. The advantage to the landlords is a better tenant retention rate.

“Shopping complexes must make themselves distinctive and different from others in the pack.

“Shoppers will become more demanding and would want to extract the best values from their ringgit, both in terms of purchase and experience.”

Samuel said the performance of shopping complexes in Johor improved in 2019, with occupancy rates standing at 75.3% compared with 71.7% 2018.

“This sub-sector witnessed an annual take-up of 2.66 million sq ft last year, slightly lower than the 2.98 million sq ft recorded in the previous year.

“Among major movements include Plaza Angsana, NSK Ulu Tiram and Pandan, Johor Premium Outlet, Komtar JBCC, Paradigm Mall, U Sentral in Segamat and Today’s Mall in Ulu Tiram.”

Samuel said new construction activity that consisted of seven completions in 2019 will inject a total of three million sq ft of new retail space into the market.

“As at the end of 2019, there were 153 existing shopping complexes (25.75 million sq ft), with five complexes (1.25 million sq ft) coming in, ” he said.

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