FOLLOWING two years of grave uncertainties as a result of the Covid-19 pandemic, the severely affected Malaysian retail property market is hopeful that 2022 will finally be a year to look forward to.

       Sunway Malls and Theme Parks chief executive officer H. C. Chan says the reopening of international borders from April 1 is a welcomed move for the market.

       “With the clearly marked date of April 1 being the transition towards endemicity, it sends a large psychological signal that we are heading back towards normalcy.

       “More importantly, it creates certainty, which is important for businesses to thrive, compared with the last two years.

       “The reopening of international borders is a welcome move as it will enable Sunway to welcome back international arrivals,” he tells StarBizWeek.

       On March 8, Prime Minister Datuk Seri Ismail Sabri Yaakob announced that Malaysia will reopen its borders from next month as it seeks to revive the country’s economy, especially the tourism industry, which has been severely affected by the Covid-19 pandemic.

       In light of this, Chan is optimistic that the second quarter of 2022 will be a strong sales period for the local retail sector.

       “We anticipate the second quarter to be strong with Hari Raya festivities contributing a significant uplift, given that the balik kampung exodus is permitted after two years.

       “Due to this, we foresee that it will bring about significant festive spending.”

       Chan adds that interest rates are also expected to be accommodative for the first half of the year.

       “The RM10,000 Employees’ Provident Fund withdrawal, to a certain extent, will allow some easing and spur more discretionary spending.

       “All in all, we expect the second quarter of 2022 to be fairly strong and robust, providing there is no serious derailment.”

       For the first quarter of 2022, Chan says performance has been better than expected.

       “On a month-on-month basis, Sunway Malls’ recovery in January 2022 came in at 120%, outperforming pre-pandemic levels.

       “It was predominantly driven by strong and consistent festive buying throughout the four weeks as opposed to traditionally the last two weeks, when festive buying momentum is at its strongest.”

       Chan says the Omicron wave, which saw daily cases escalating in the second week of February, placed a dampening effect on the local retail sector.

       “But the effect on Sunway Malls was less severe than anticipated. Factoring in the low seasonality period, we managed to reach 85% of our sales levels despite daily cases hitting the 30,000 range.”

       Despite the spike in cases, Chan says the healthcare system was not strained and economic activities were still allowed to resume.

       “We forecast business to reach 95% normalcy in March, in view of the gradual easing of Omicron’s infectivity.”

       Meanwhile, Retail Group Malaysia (RGM) in its latest Malaysia Retail Industry Report says it projects a 6.3% growth rate for the local retail sector for 2022.

       “This is an upward revision from its estimate made in November last year at 6%. The Malaysian retail industry looks forward to a strong recovery as it enters the third year of the Covid-19 pandemic. However, many challenges remain in this new year.”

       RGM notes that the Omicron wave has disrupted the pace of recovery of the retail industry in Malaysia.

       “Based on the Covid-19 development in recent weeks, the retail market prospect has become uncertain again.”

       When daily positive cases climbed to a high of 20,000 cases on Feb 11, RGM said Malaysian consumers started to become wary of the high possibility of virus infections.

       “Although major shopping malls in the country are still crowded on both weekdays and weekends, car traffic starts to drop gradually when daily cases maintain above 20,000 cases.”

       RGM says the high daily positive cases and increased hospitalisation rates remain worrisome.

       “This fourth-wave virus pandemic is haunting Malaysian retailers again.”

       Additionally, RGM says the delay in international borders’ opening for all countries has affected foreign tourists’ arrival in Malaysia.

       “The current entry requirements for foreign tourists into Malaysia are troublesome and it discourages leisure travellers from overseas countries. This has affected retail businesses that have been dependent on leisure travellers from other countries.”

       Separately, RGM says prices of basic necessities and many consumer goods have risen since the end of last year.

       “Many food and beverage outlets have increased their prices as well. Rising prices are expected to continue during the first half of 2022.

       “In addition, oil prices have been rising in recent weeks. The higher cost of living will affect the purchasing power of Malaysian households in the new year.”

       RGM says potential interest rate hikes in the near term will also have a negative impact on the buying power of Malaysian consumers.

       “The war in Ukraine will affect the supply chain of consumer goods worldwide.

       “This surprising war will also lead to even higher oil prices and commodity prices,” it says.

       For the first quarter of 2022, RGM says the Malaysian retail industry is expected to enjoy a strong growth of 16.5%, due to the Chinese New Year festival and the further relaxation of standard operating procedures.

       “The Malaysian retail industry is anticipated to grow at 4.2% during the second quarter with contribution mainly from Hari Raya.

       “The third quarter growth rate is estimated at 3.4%, due to a low base in the same period a year ago. By then, Malaysia should have begun its endemic phase of Covid-19.”

       For the final quarter of 2022, RGM expects the Malaysian retail industry to grow 3.6%.

       CLICK TO ENLARGE

       According to Knight Frank Research’s Real Estate Highlights for the second half of 2021, the retail property market within the Klang Valley returned to a semblance of normalcy as it entered phase four of the National Recovery Plan on Oc 18, 2021.

       “The long-awaited reopening of the economy and lifting of interstate travel restrictions brought relief to the heavily impacted retail sector.

       “Owing to the impact of Covid-19 on the retail sector following interminable and unprecedented periods of lockdown, the recovery of the sector is expected to be gradual.”

       Knight Frank Research says the drought of business operations during the prolonged lockdown also led to the inevitable closures of local and international brands.

       “Coupled with the incoming supply of retail space and the evolving retail landscape, rental rates and occupancy levels within the Klang Valley are expected to be under pressure.”

       It adds that the government has ramped-up efforts to assist businesses to migrate online, as the lack of eCommerce and online marketing skills have proven to be a key barrier to entry.

       “The newfound optimism for recovery of the retail sector is threatened by Omicron, the new variant as retail recovery is largely in sync with the number of Covid-19 cases and its subsequent restrictions,” says Knight Frank Research.

       Despite seeing 150 days of lockdown in 2021, Chan says sales and traffic levels for Sunway Malls returned to 100% in the fourth quarter of 2021.

       “The strong pent-up demand, festive season, high percentage of fully vaccinated individuals and declining daily Covid-19 numbers were among the key drivers in aiding the recovery at the end of 2021.

       “Improving consumer sentiment also paved the way for better spending, on the back of improved labour market expectations,” he says.