Thursday 28 Mar 2024
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This article first appeared in The Edge Financial Daily, on March 31, 2017.

 

KUALA LUMPUR: CapitaLand Malaysia Mall Trust (CMMT) remains cautious about its outlook for financial year 2017 (FY17), due to rental reversion pressures amid an increasing supply of retail space.

Low Peck Chen (pic), chief executive officer of CapitaLand Malaysia Mall REIT Management Sdn Bhd, which manages CMMT, said the scheduled completion of new retail supply, especially in the Klang Valley, will intensify the competition level among shopping malls.

The advent of e-commerce, which is reshaping traditional retail and consumer behaviour, is another challenge for CMMT, she said.

“Headline growth will be somewhat impacted by rental growth. The latter is expected to be under pressure amid the challenging operating market and consumer sentiment,” said Low.

For 2017, it expects a portfolio lease expiry of 50.6% — by gross rental — largely due to the expiry of key anchor tenants compared to the norm of about 30%, said Low.

When asked if lease renewal will become an issue for CMMT this year, Low said: “So far, it’s manageable. Rental reversion is happening industry-wide, which will continue in the short term.”

As such, she maintained that CMMT will still see growth in rental reversion, albeit a “muted” one.

“Some of our Klang Valley assets are subject to unfavourable micro property market conditions. So, the pressure remains [in those areas]. It will take a longer time to fill up the vacancies,” said Low. Still, the occupancy rates of CMMT’s Klang Valley assets are still above 90%, she noted.

CMMT’s net property income (NPI) for FY16 climbed 7% year-on-year to RM242.49 million, from RM226.39 million, but the laggard that continued to drag on its performance was Sungei Wang Plaza, where NPI fell about 27% to RM27.26 million, from RM37.2 million, due to ongoing mass rapid transit (MRT) construction works and redevelopment of Bukit Bintang Plaza.

Though Low said shopper traffic has now stabilised to about one million to 1.5 million per month, there is unlikely to be a pickup in Sungei Wang Plaza’s NPI this year, as it is still going through a “rental adjustment” period.

“But I do see a reconfiguration opportunity,” said Low, highlighting the completion of the MRT Sungai Buloh-Kajang Line in the second half of 2017, which is anticipated to benefit the mall in the long term.

She said CMMT will spend RM5 million to improve pedestrian connectivity at Sungei Wang Plaza, with a link bridge and external escalators to be built by the third quarter of 2018.

Despite ongoing economic uncertainty and rising competition, Low said the retail outlook remains positive in the long term, given the favourable demographic pattern and stable economic fundamentals.

“On the leasing front, we will continue to broaden [our] retail network through the introduction of more experiential elements and entertainment facilities to ensure our malls remain relevant and attractive,” added Low.

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