The average occupancy rate of retail space in the Klang Valley, which has been falling marginally over the last six years, is now hovering at a five-year low of 86%. Despite this, a new supply of retail properties continues to be strong and is expected to remain so over the next 3 years with no loss of enthusiasm commercially by developers to build more. As of 3Q17, total retail stock in the Klang Valley stood at 61 mil sf and estimated pipeline supply for those under construction is currently estimated at 16 mil sf, comprising 23 projects. This implies an overall growth of 26% to current stock. The market share is controlled by limited key players in several subsegments such as hypermarket, supermarket and cinema. With the rise of e-commerce, experiential retail and a shift towards an ageing population, real estate investors may need to re-examine their assumptions on what is “a reasonable entry return” on the retail property segment.
Source: The Edge Financial Daily, 6th Dec 2017