KUALA LUMPUR (April 1): The industrial property segment especially logistics-related spaces could be the silver lining in the current market plagued by the COVID-19 outbreak.
Knight Frank Malaysia capital markets executive director Allan Sim said the current Movement Control Order (MCO) imposed on the country to stem the spread of the outbreak will incentivise many late adopters of e-commerce to try out online shopping while the disruptions to the supply chain may give rise to potential decentralisation of logistics players into multiple smaller satellite distribution hubs to support local distribution channels.
"This will further accelerate the growth of last mile delivery fulfilment centres and logistics services. Given the above, the industrial property market outlook may be bright with additional demand for warehouse space and factories arising from the decentralisation strategies," Sim said in a statement released by Knight Frank yesterday.
Meanwhile, the real estate firm expects lower activity in leasing and investment of commercial office space as both local and multinational companies delay or put on hold their real estate decisions. With the reduced leasing and investment activity, commercial office and retail rents will be further under-pressure, it said.
On the other hand, yields are bound to increase as values come under pressure.
"Genuine, motivated sellers will consider reducing their price, pushing yields higher. Domestic investors should also consider the benefit of investing some of their capital in overseas real estate markets which will provide diversification in real estate returns and currency," offered Knight Frank Malaysia capital markets executive director James Buckley.
On co-working spaces, Knight Frank said such spaces may be less popular as there will be reduced desire for clients or members to congregate and interact face to face in one location in the immediate term after the lifting of the MCO.
“However, once confidence improves with businesses back to work as usual, co-working or flexible spaces may be a good option for new occupier(s) and those looking to expand to navigate in the near term before committing to a longer term plan," said Knight Frank Malaysia corporate services executive director Teh Young Khean.
In the retail segment, rents will be under further pressure especially retailers located at tourist zones which have been experiencing sales decline since the onset of the COVID-19 outbreak, with the exception of those providing essential goods or services.
“While retail spending on non-essential goods are not the focus at this moment, demand for essential goods is increasing. Online shopping and delivery services are gaining popularity. After the MCO, occupancy of malls will be under pressure as some retail outlets may be forced to close due to the strain on their cash flow and unsustainable businesses.
“Nevertheless, landlords are stepping up during the MCO to assist retailers by introducing relief measures, for example rent free package for non-F&B related retailers and rental rebates for retailers," offered Knight Frank Malaysia retail consultancy and leasing associate director Ben Ooi.
As for the hospitality and tourism sector, global travel is expected to drop by 10 to 18%, said Knight Frank Malaysia managing director Sarkunan Subramaniam, quoting the figures from Tourism Economics.
"It is the biggest year-on-year drop amid the outbreak of COVID-19. Hence the hospitality sector will face financial pressure with lower returns. However, cheaper travel and accommodation cost may motivate and drive the sector once the COVID-19 pandemic is contained, serving as a slice of positivity in this sector.”
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