‘Experiential-based’ services the next big thing in Johor malls

Kind gesture: The Johor Premium Outlet is offering rental waivers to tenants affected by the MCO.

MORE retail operators within the Johor retail property market are gearing up to offer a more “experiential-based” services, as the sector finds new and different ways to grapple with the impact of the Covid-19 pandemic.

KGV International Property Consultants (Johor) Sdn Bhd executive director Samuel Tan says the retail sector in Johor is expected to remain soft this year as a result of the pandemic.

“There were no less than 10 new shopping malls opened for business in Johor Baru in the past two years. With our borders remaining closed and Johor Baru population hardly increasing, we do not see how consumer spending can keep up with the increase in retail space, ” he tells StarBizWeek.

Samuel says the Covid-19 pandemic has expedited the adoption of e-commerce.

“Online shopping used to be only for the younger generation who are more IT-savvy. The Covid-19 pandemic disrupted our habits and forced everyone to resort to virtual-shopping during the movement control order (MCO).

“In view of the threat of getting infected, we expect more consumers to at least switch part of their shopping routine virtually, thus reducing their physical shopping trips.”

Samuel adds that many Johor Baru retail malls also rely heavily on Singaporean shoppers.

“Many of them are either day-trippers or weekend shoppers travelling in during the day time or over weekends to shop, eat, entertain and relax. With current controlled movement between countries, shopping trips are still non-essential and hence the army of shoppers’ and tourists from other countries are unlikely to return this year.

“We have witnessed a drastic drop in shoppers in many retail malls. Some of the tenants have already called it a day.”

CBRE|WTW director Tan Ka Leong concurs that most shoppers and retailers were more focused on online sales during the MCO.

“However, since the recovery MCO in June, visitors have begun visiting retail malls, albeit at a lower footfall rate compared with pre-Covid-19. It was reported in 2019 that Iskandar Malaysia had welcomed the opening of five malls, namely The Mall @ Midvalley SouthKey, Toppen Shopping Centre, Beletime Danga Bay and Sunway Big Box.

“With the existing large supply of retail space and the Covid-19 pandemic, it is very challenging and tough for the new malls to survive and secure new tenants.”

With cross-border travel restrictions, Ka Leong says tourist-focused malls have been badly affected in terms of shopper traffic.

“The mature malls with higher rents may see some tenant movements, especially when their term of tenancy is expired within the period of MCO or recovery MCO. Nevertheless, neighbourhood malls of hypermarkets or a hypermarket as their anchor tenant are less impacted by the pandemic.”

Post the recovery MCO, Samuel says shopping malls should see increased footfall, adding however that the situation will not return to pre-Covid -19 levels.

“We expect many retailers to adopt a ‘twin-operation mode’ or ‘on-off” line of retail business. Many will have to start or strengthen their online presence. The physical store will be a showcase for those who want to touch and feel the product.

“Consequently, many may downsize their physical stores as there is no need to stock up within the shop unit. Downsizing also saves rent during tough times.”

However, Samuel adds that shopping malls are likely to gear towards “experiential-based” type of services.

“This Covid-19 pandemic, though highly infectious and deadly, will eventually pass. In the post-Covid-19 era, especially after an effective vaccine is found, shopping malls will still be relevant.

“It will be a place for shoppers to experience unique dining, watching movies, trying out the latest digital gadgets or getting a spa treatment within a comfortable ambience.”

Knight Frank, in its Real Estate Highlights Research for the first half 2020, says the first half of 2020 saw operators of shopping malls such Aeon Mall Tebrau, Sunway Big Box, KSL City Mall and Johor Premium Outlet offering rental waiver to tenants affected by the MCO.

It adds that the retail sub-sector has been more severely affected by the pandemic due to restrictions in movement, travels and international border closures.

“The pandemic, which has led many countries into a recession, has also seen a change in consumer behaviour as people become more prudent and selective in their spending pattern, placing priority on essential items such as food and health products.

“Under the recovery MCO, footfall to shopping malls has been gradually improving as retailers and shoppers adapt to the new standard operating procedures with strict guidelines on contact tracing, safe distancing and cleanliness.”

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