1 month ago
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PETALING JAYA: Footfall and tenants sales could decline by 20-30% in fourth-quarter 2020, and concerns over potential tenant drop-outs could grow if the deterioration in tenant sales is prolonged, a note by CGS CIMB Research stated.
“Anecdotal events in October point to the potential shutdown of certain departmental stores, which have been negatively affected by falling footfall and tenant sales.
‘Recent events, which coincided with the reinstatement of the conditional movement control order (CMCO), also underscore the end-Jun statistics by Retail Group of Malaysia (RGM) indicating that retail sales for the non-supermarket department store sub-segment of the retail sector in the Apr-Jun period plunged 63% year-on-year,” it said.
It pointed out that the dropout of Robinson Co (Malaya) Sdn Bhd in The Gardens Mall will negatively impact IGB REIT, as it could see an estimated 3.4% negative impact on FY21 revenue and 3.8% negative impact on FY21 net property income.
“It should be manageable in the medium term provided a replacement tenant is found or space reconfiguration plans are immediately enacted. We do not foresee similar drop-out risks emerging for other non-anchor tenants as tenancy renewals for FY21F are in the negotiation stage and are more likely to favour tenant retention, although this may be at the expense of positive rental reversion,” it said.
At the same time, the Malaysian Association of Film Exhibitors collective decision to temporarily suspend cinema operations from November could impact the rental income and footfall of 12 retail malls across M-REITs under CGS-CIMB’s coverage.
It pointed out that cinemas roughly occupy 1-6% of the total net lettable area of individual retail malls.
The research house is maintaining its neutral stance on REITs, with longer lead times for replacement tenants a new and emerging risk for selected malls.
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