DURING a recent visit to inner George Town on Penang Island with my friends, we noticed that many restored heritage buildings were being used as food and beverage (F&B) outlets or hospitality establishments.
It came as no surprise when one friend asked whether the population of Penang is large enough to support the new F&B joints and hotels that have mushroomed in the Unesco heritage site.
Indeed, those who invested in heritage properties are concerned over the current economic environment that has prompted many consumers to hold back on spending.
The retail trade is already feeling the heat caused by weak market sentiments, GST, high overheads, competition and stagnant wages.
Penang’s consumer electronic goods business, in particular, is expecting a double-digit percentage decline in sales this year.
So, how will the new F&B outlets fare in these trying times?
High rental is worrying to the food and hospitality business.
Heritage properties in the inner city are now rented out for RM3,000 to RM8,000 a month — depending on location, size and condition of the premises — compared with RM1,000 to RM3,000 in 2008.
If the F&B business picks up further, then rentals will head for a correction as determined by demand and supply.
The mushrooming of heritage hotels in the inner city has intensified competition in the hospitality industry.
A recent survey by an online travel booking portal showed over 700 listings for accommodations on the island.
Many hotel operators are already projecting stagnating occupancy rates for this year because of the competition while budget hotels have lowered room rates to between RM85 and RM140 compared with RM100 and RM200 before 2014.
A real estate valuer suggested that Penangites should invest in heritage properties to be used as offices, retail shops, education centres, residences and places to hold events as an alternative to the present commercial usage.
The value of heritage properties has risen substantially since 2008 due to speculation and limited supply — and will likely rise further.
According to George Town World Heritage Inc, there are only 3,853 heritage property units in George Town.
Heritage properties now command prices ranging from RM550 per sq ft to RM1,800 per sq ft.
They cost RM400 per sq ft to RM700 per sq ft in 2008.
At the same time, the cost of restoring heritage properties has increased by about 40% since 2008.
Today, restoration cost ranges from RM150,000 to RM500,000 per unit.
For instance, restoring a heritage property with a built-up area of 2,000sq ft will cost about RM150,000.
To restore the roof alone will set you back a whopping RM50,000.
Despite the increased cost, some local investors are still keen on heritage properties. Others, however, are waiting for better times before committing themselves lest there is an oversupply in the market.