The short-term outlook for shop offices and retail space in the Klang Valley is stable despite concerns over inflationary pressures as well as reduced rental yields, property consultants say.
A report by DTZ Nawawi Tie Leung Property Consultants Sdn Bhd said while the retail market continued to be active, the rise in the inflation rate would have an adverse impact on household disposal income leading to declining purchasing power.
According to the Department of Statistics, the Consumer Price Index (CPI) in the first six months of 2011 increased by 3% year-on-year to 102.5. The CPI in June increased by 0.3% month-on-month and 3.5% year-on-year to 103.2.
“The retail sales growth for 2011 is expected to be maintained at 6% due to concerns over high oil prices, declining purchasing power and continuous surges in prices of goods and cost of operations,” said the report.
The Malaysia Retailers Association had earlier forecast retail sales growth at 7% year-on-year for both the second and third quarters of this year due to the festive celebrations and after recording a 5.1% growth in the first quarter. The report also pointed out that the abolition of duties for 300 selected items in Budget 2011 was making an impact on tourist shopping expenditure.
“For the first quarter of 2011, tourist shopping expenditure increased by 35%. With tourist arrivals still growing, visitors spending will cushion waning domestic consumption.”
“The ETP has identified integrated health and wellness resort developments to boost retail expenditure through spa products and services and tourism with investment of RM3bil and the creation of 11,000 jobs,” says the report.
The occupancy rate of retail centres remained stable and high at an average of 90% in the city and 87% outside of Kuala Lumpur.
About 520,000 sq ft of new space were added in the second quarter of 2011 with stock consisting of 42.17 million sq ft in the Klang Valley, said the report.
CB Richard Ellis (M) Sdn Bhd executive director Paul Khong expected the commercial property market to continue to do well through the fourth quarter.
“The commercial outlook is still relatively strong in the local property market and new launches are still coming in at select locations at record prices,” he said.
According to Khong, there is still strong investor interest in landed commercial properties like shoplots due to the vibrant retail market and the relatively low and attractive interest rates.