Short-term stable outlook for shop offices and retail space

PETALING JAYA: 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.

By The Star

Sensible move for SP Setia

Kuala Lumpur: It is cheaper to gain control of a listed company with landbank in Penang than buy large chunks of land in the island, analysts said.

Therefore, it makes sense for the likes of SP Setia Bhd to eye a stake in such companies as landbank in Penang is depleting and buying the plots there is not easy and cheap, they added.

"Having a stake in companies such as Eastern and Oriental Bhd (E&O) will directly give SP Setia access to present and future property projects in Penang," an analyst said when asked to comment on reports that major shareholders of SP Setia are keen to buy a stake in E&O.

He added that such interest has also put a spotlight on the value of reclaimed land and its potential development in the state.

For example, analysts cited that Ivory Properties Group Bhd reportedly will have to fork out about RM1 billion to develop 27.34 hectares (ha) and reclaim up to 14.17ha of land that it won via a tender from the Penang Development Corp last Monday.

E&O, one of Penang's top property developers and land owners, has some 200ha in Penang alone worth RM1.1 billion, according to information obtained from its annual report.

It also has sizeable landbank in Gombak, Ampang, Damansara Heights and other areas of Kuala Lumpur.

Analysts noted that several shareholders of E&O had been building up their stakes in the company between July 19 and July 22 2011, based on the latest announcements.

This could be an indication that something major is indeed happening in E&O, they added.

Singapore's GKG Investment Holdings Pte Ltd, controlled by Goh Geok Khim, bought 250,000 shares, rising its stake to 11.49 per cent.

Datuk Azizan Abd Rahman bought 100,000 shares in E&O to raise his stake to 0.5 per cent.

E&O is currently 17 per cent-controlled by managing director Datuk Tham Ka Hon and his spouse.

Business Times (BT) reported last week that major SP Setia shareholders planned to buy a stake from E&O shareholders.

SP Setia's three biggest shareholders are Permodalan Nasional Bhd with a 32.9 per cent stake, the Employees Provident Fund with a 14.47 per cent interest, and SP Setia president and chief operating officer Tan Sri Liew Kee Sin with 11.96 per cent share.

Meanwhile, Mah Sing group hinted that it would prefer to buy land in Penang instead of acquiring a stake in a listed firm with landbank there.

"We are open to opportunities that create value be they outright land acquisitions or joint ventures in Penang," group managing director Tan Sri Leong Hoy Kum told BT.

By Business Times