Higher end retail still okay? Growing 3-4%.

Actually, it’s quite easy to know if the economy is well or ‘sick.’ Look at retail. When we look at retail, we can look at malls. Read here: Seriously, when there are just too many malls As we may have noted, many malls are today struggling. So, should we conclude that the retail is bad? I was in Genting days ago. I bought two Polo T-shirts in Padini. My brother-in-law likes it, bought two and my potential brother-in-law bought 4! Padini store was packed. I came back, went to 1 Utama, I could hardly find a parking spot. In Atria however, parking was a breeze and there were lots of spots available. It was on the evening of Sunday. No idea if that’s the cause. Was at IKEA just last weekend and the lines were still long. To be very direct, no one would think of buying furniture or furnishings when they are struggling. It is definitely not a necessity or even a need. Is retail doing badly then? 
Pavilion Real Estate Investment Trust (REIT) may be looking at a 3-4 percent growth in retail spending in 2015, according to Affin Hwang Capital Research. This is also supported by a robust fourth quarter due to the year-end festive season. It observed the robust year-end shopper traffic at Pavillion KL. I was at Pavillion KL for lunch just two weeks back. It was very packed. Nearly everyone was holding a shopping bag of some brands. Yes, Pavillion KL are mostly the higher end ones. Perhaps Christmas saved the day? Well, we still have the Chinese New Year coming soon as well. My plan remains the same, three new shirts for Chinese New Year 2016. I have already bought 2, thus I have quota for one more.
In fact, the upcoming renewal of 68% of Pavilion REIT’s net lettable area (NLA) expiring in 2016 is quite positive. The rentals will be revised upwards and this is mostly because the renewing tenants are mostly stable due to the proven track records at Pavillion KL. Even 2016, where many were predicting a worst year for property market may not be affecting Pavillion KL. This is because it caters to the middle and upper-middle class of society. Besides, Affin is expecting the moderation of private consumption growth is likely to be temporary because of the weakness in the ringgit.
This report will not be reflective of many malls. Especially the smaller ones which is close or nearby the bigger and more established ones. With similar brands within the malls, they (smaller malls) will struggle. If I have a family, I would prefer a bigger mall for the variety. If I am bringing my partner, the mall may need to have cinemas as well as lots of food and beverage choices. Oh yeah, more malls are opening in 2016. Let’s visit as many as possible to understand which ones may just not survive beyond the next few years. Car parks would be a good sign, followed by the visitors you can see taking the escalators. Notice in some malls, the whole escalator is full of people while in some, you may be the few taking the escalator at the same time… Happy shopping.
written on 29 Dec 2015
Next suggested article: Klang Valley property retail market? Oh dear…


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