Contributed by Vicky How
With the expansion of the e-commerce market and development of secure online transaction, many products and services are now easily available online. This has changed the way that consumers shop and acquire products and services.
With the birth and evolution of companies like Amazon, eBay and Alibaba, the retail business has evolved to a higher level. Twenty years ago, if someone were to tell you that you can buy your groceries or do your banking transactions on the internet, you will probably be puzzled by the statement but not now as that is a norm now.
The point is that Malaysia and the rest of the world is undergoing a retail revolution. Malaysians are less affected in comparison to developed countries such as the United States of America.
In the United States, many shopping malls and have gone out of business and worst, some have completely shut down and been left abandoned. I foresee that we will soon be facing the same problem as many retail business owners and entrepreneurs are shifting from having physical stores towards marketing products and services online through e-commerce.
This enable them to save cost on the workforce as well as the retail rental. Retail rental normally increases (approximately after two to three years) when the term of tenancy are renewed. The owner of the retail space knows that you will not move out of the mall if your business is doing well and as such, you would be agreeable to an increased rate of rental.
High retail space rental rates affected major portion of the business cost with business owners having no choice but to opt out of the shopping mall and operate their businesses in the shoplots surrounding the shopping malls to market to the similar crowd which frequents the shopping mall.
With the development of the internet platform, the space needed for conducting business operation especially in the fashion, service and groceries sector has shrunken. Last year, the public reacted negatively to leaked news that Maybank was going to close 27 branches all around Malaysia. Many people speculated that Maybank being the No.1 bank had been losing business during the economic downturn as the reason for downsizing which is not the main reason.
Many years ago, many bank outlets in the United Kingdom have changed the modus operandi whereby there are only ordinary bank customer representative available to ensure that you know how to operate the self-service automated teller machines. Imagine a bank with just self-service automated teller machines with the rest of the banking service done through online or telephone calls.
With regards to Maybank, since everyone has become more accustomed to online banking transactions, there is no need for multiple physical bank in the same areas in close vicinity to the customers. In fact, the queue in the bank has shrunken.
Besides banks, grocery hypermarkets such as Giant, Aeon Big and also Tesco are down-sizing due to the same reason. With retail space for lease becoming dearer, grocery hypermarkets are shifting to online grocery business rather than just investing in more physical stores.
As all these happen, the demand for property in commercial market is changing.
Three years ago, many property market reports state that Malaysia have strong demand for shopping retails, and that in fact we were facing a shortage of retail space. The reports may be true three years ago but not now. As all the developer acted upon the reports, there were influx of retails space. At the end of 2015 itself, the data from National Property Information Centre, Malaysia states that we have a total of 148.85 million sq ft of retail space with 18 million additional sq ft either being built or in the planning phase in Malaysia.
Some of these mall were not able to get tenants and worst still, the current market downturn has not deterred developers from building more malls and the plans with shopping mall were duly approved by the local authorities. My biggest concern here is that we will be facing a similar problem of malls closing down which the United States is currently facing. Worst still, the development and concept of each shopping mall are almost similar. Developer has to be creative in differentiating their mall by not bringing identical brands and retailers into the mall.
In the coming years, I foresee that people will only need space to keep their inventory stocks and to manufacture goods and products. Hence, buildings such as factories and commercial shop lots will be ideal depending on the size of the business. The aforesaid buildings are good investment as the property are bought together with the ownership of the land. As land in Malaysia is scarce, purchasing factory and commercial shop lots for business is also good for capital appreciation besides collecting rental.
In conclusion, there will be an oversupply of retail space available due to the growth of e-commerce transactions and influx of retail space. Although there is now an oversupply of office space available in Malaysia, small retail business owners and entrepreneurs will be actively looking for office lots instead of retail space.
As the businesses now operate in the online platform, they can not only target Malaysian consumer itself but also global consumers. Once business has expanded, they will need a headquarter office to operate the global business to process and record documents and host customer service representatives. Offices which provide a good corporate image and located within MSC status buildings of Grade A and AA will be beneficial in the future.
Vicky How is a licensed valuer registered with the Malaysian Board of Valuer, Estate Agency and Appraisal (BOVAEA). She is currently a director of Henry Wiltshire, an international estate agency company.
The views and opinions expressed on this article are solely those of the original author. These views and opinions do not necessarily represent those of StarProperty.my.
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