By Hakim Hassan

hakim@thestar.com.my

It will continue to be a challenging time for the retail sector in 2018, according to Savills Malaysia Sdn Bhd deputy executive chairman Allan Soo.

He reckons it will also be a challenging year for sectors such as fashion and groceries but suggests that the other industries will continue to grow from last year.

“For the short term, we see that this year is still going to be challenging because the numbers are increasingly flat. Fast fashion in particular will be facing challenging times with new names coming in.

“However, there will be continued increase in sales for cosmetics, accessories, and food and beverage,” he said during the 11th Malaysian Property Summit 2018.

Soo said that in the short run, the retail sector and malls in Malaysia will face challenges in terms of additional supply, where there will be consolidation in the industry and changes in the landscape.

“In the long run, we are going to see changes regarding how the malls react to the millennial crowd and e-commerce itself,” he added.

Soo also said that retail stores have to adapt because the increase in growth for e-commerce has been significant in recent years. He believes that big data will be a major influence on how physical stores can compete.

“Kuala Lumpur Convention Centre did about RM2.5bil in sales turnover last year. In comparison, Lazada collected about RM1bil a day,” he said.

Soo explained that although the numbers might suggest that physical retail stores are losing their lustre, there will be a synergy between retail and online where both components could still be relevant.

He said the increase of incoming malls will cause a glut, especially in the Klang Valley. Moving forward, the exponential growth of online shopping and the current competition will make it challenging for current mall operators.

“Malaysia has more than 250 malls, 170 of which are hypermarkets, and a combined net lettable area of around 62 million sq ft. If you look at the population in the Klang Valley – that is about 7.4to 7.5 million – you have per capita of 8.4 sq ft retail space.

“We will have an incoming supply up to 2021 of another 20 million sq ft. The overall occupancy rate has dropped to 87.9%.

“It is still not that alarming. But going forward, the big question is how we will fare with e-commerce coming in so fast,” said Soo.