Shopping malls still in demand in Shah Alam

FILLING up shops in malls is not a problem in Shah Alam due to the limited supply in the area, despite the fact that this sub-segment of the property sector has reached its saturation point.

“The industry has reached its saturation for over the last 10 years. We are in an oversupply situation but we still have developers who are interested to build malls,” says Henry Butcher Shopping Centre Consultants Sdn Bhd managing director Tan Hai Hsin.

“However, Shah Alam does not face any serious oversupply (situation). One of the reasons is because cinemas were not allowed to operate in Shah Alam until last year,” he adds.

Tan tells StarBizWeek that generally in the Klang Valley, the occupancy rate for shopping malls is 85%.

“Some malls are very well occupied and some are empty. It depends on how it is set up, the type of properties and the management,” he says.

A mall that is 100% owned by a single owner tends to do better than a mall that is strata titled, as all the retail shops in the mall are individually owned, Tan opines.

“(The shops or outlets) are individually owned; it is difficult to manage because you are dealing with hundreds of owners, each of them chooses their own tenants.

“Hence, there is no control on tenant mix. This factor tends to effect the success of a shopping mall,” Tan says.

Meanwhile, Tan believes the upcoming CentralPlaza@i-City shopping mall has huge success potential, because of its location.

To date, there are only two other shopping centres on the whole stretch of the Federal Highway, one is Mid Valley which is in Kuala Lumpur and the other one is a cluster of shopping malls (examples are Empire and Subang Parade) in Subang.

“The next mall on the Federal Highway will be the CentralPlaza@i-City located in Shah Alam. It will cater to a sizeable market close to 700,000 of Shah Alam’s population and some 900,000 of Klang’s population,” Tan says.

He says that upon completion, the CentralPlaza@i-City shopping mall will be the largest shopping centre in Shah Alam. It is due for completion by end of 2016 with a gross floor area of around 1.5 million sq ft and net leaseable area of around 1 million sq ft.

“When it comes to malls today, size matters,” Tan says, adding that the Klang Valley “urban family” prefers to go to bigger shopping centres, particularly during weekends.

“They want to go to a place where they can spend hours, at least half of the day, there, because it offers various choices in one place for all the family members,” he says.

Having said that, shoppers between Shah Alam and Klang will soon enjoy more options because CentralPlaza@i-City is going to adopt a Thai retail concept.

Previously, according to Tan, most of Malaysia’s shopping malls adopted the Japanese retail concept, where the hypermarket, or supermarket, is located below and retail shops above it.

“Nowadays, we are moving away from that concept, although we still have a hypermarket in a mall. However, with hypermarkets mushrooming in Malaysia, more people prefer to make a short trip to a hypermarket, or to smaller malls to run their daily errands and utilise their weekend to enjoy the environment of a bigger mall,” he explains.

Nonetheless, Tan notes that having Thai retail in the country is a “refreshing” concept, because most of international brands that come to Malaysia will start their journey in South-East Asia in Singapore first, as seen in brands such as Topshop, Uniqlo and H&M.

“Brands usually establish themselves in Singapore before they come to Malaysia.

“However, many Malaysians and Singaporeans like to go to Thailand for shopping, not because of the brand but for its design and value for money,” he says.

I-Bhd signed a memorandum of understanding with Thai-based mall designer specialist Central Pattana Public Co Ltd (CPN) last year to jointly build a mall at i-City.

I-Bhd through its unit i-City Properties Sdn Bhd intends to hold 40% stake and CPN, through its local subsidiary, the remainder in the joint venture company.

The mall will be designed to cater to the needs of Thai retailers.

“Klang Valley people have always opined that most of the new malls share similar concept. Hence, Central Plaza will be able to offer a refreshing concept,” Tan says.

Adding to that, he says the accessibility of Central Plaza will be a further catalyst for its success. “They are going to build a ‘fly-over’ that will be directly linked to the mall, similar to Mid Valley.”

According to I-Bhd representative, the design for the mall is expected to be ready within a month. It will be managed by CPN.

In terms of retail space within the i-City township, Tan believes that both the commercial space outside of the mall and the retail space within will be able to complement each other.

“Some retail shops operate more suitably outside malls and this adds variety within the township,” Tan explains

Source The Star, June 22, 2013

A new bright spot for Cheras

THE integrated mixed project known as Sunway Velocity that Sunway Bhd has embarked on along Jalan Cheras, Kuala Lumpur, will emerge as a bright spot in that vicinity.

In the neighbourhood of Jalan Cochrane, redevelopment efforts have given a new lease of life to the area.

Sunway central region property development division executive director Ong Ghee Bin says in an interview with StarBizWeek that the Velocity project where people can live, work and play under one roof will further enhance the area.

He concedes that the selling prices of the properties, both residential and office, are at record high in that area, which was once considered “run down”.

“With this regeneration, we are able to transform the whole area,” he adds.

CH Williams Talhar and Wong Sdn Bhd managing director Foo Gee Jensays: “With the Sunway brand name, selling prices are at a premium, taking into account Sunway’s reputation for reliable quality of design, materials used and workmanship.”

He also says that expectations have always been high that redevelopment of the Jalan Peel and Jalan Cochrane area will offer investors the opportunity to own a property with high rate of capital appreciation, based on the track record at nearby Taman Maluri.

“Jalan Peel/Cochrane was originally a government housing area. Jabatan Kerja Raya (Public Works Department) workshops and the government printer were established in this area. This was followed by other private light and medium-scale industries surrounding the residential area,” Foo elaborates.

Among others, Malton Bhd has introduced Amaya at Maluri, a mixed development which sits on a 2.7-acre leasehold land with a gross development value (GDV) of RM215mil, which was launched at RM450 per sq ft (psf).

“In comparison, the current average asking price at Amaya Maluri is about RM700 psf … but it will not have the convenience of being integrated with 1 million sq ft retail space and office suites,” says Foo.

He points out that older developments like Pertama Residency and Plaza 393 cannot be compared with Velocity because they were built much earlier.

It is also worth noting that the 23-acre freehold land neighbouring some of Cheras’ mature townships like Taman Maluri, Taman Shamelin Perkasa and Taman Pertama is a rare find.

Sunway Velocity

Sunway can increase the attractiveness of integrated mixed development by improving traffic flow.

Besides having the two future mass rapid transit (MRT) stations Cochrane and Maluri that are 100 meters and 220 meters away respectively from the project, the developer has planned a tunnel with direct link from Jalan Cheras to the shopping mall basement carparks and an underpass from Jalan Cheras to Jalan Peel.

The builder has also proposed an elevated and covered walkway to link the upcoming MRT stations.

“We want to do things properly and we don’t mind paying extra for the infrastructure for people’s convenience,” says Ong.

On top of the connectivity of the project via various roads and through the MRT stations which are expected to be completed by 2017, the idea of a self-sustained development becomes even more seamless with all the planned covered walkway for people to go from one place to another within that locality, he adds.

The project is a joint venture with landowner Fawanis Sdn Bhd and has a GDV of RM3.8bil. It comprises three phases. Phase one and three consist of serviced apartments, retail shops and office suites.

There are several types of offices to cater to different business needs. For instance, its designer suites are popular among start-ups while its signature office blocks target small and medium enterprises, Ong says.

The designer offices, with a built-up area of 600 sq ft, are 85% sold and boasts of facilities like swimming pool and gym.

Serviced apartments known as V Residence, meanwhile, come in varying sizes. There are 564 units, of which 411 are studios and 204 small office home office (SoHo) units.

When launched last year, prices of the residential units started from RM750 psf.

Ong says subsequent launches of serviced apartments were priced at RM900 to RM1,000 psf. There was overwhelming demand.

“We have studio units to cater to the young adults or couples, apartment sizes ranging from 800 to 1,000 sq ft for smaller families and 1,000 to 1,500 sq ft for medium-sized families,” he says, adding that 334 units will be launched in August.

Phase two of Velocity, which includes a 1.4 million sq ft shopping mall, a 284-room four-star hotel, office tower and corporate office collectively worth RM1.5bil, will be owned and operated by Sunway.

The mall, slated for opening at the end of 2015, is going to be an exciting lifestyle mall, he says, adding that the management will time its opening for the year-end festivities.

After the shopping mall, it will launch its hotel, and subsequently the office tower, Ong adds.

“Many of our existing tenants (from Sunway’s other malls) are interested to come over as it will have an interesting concept,” he enthuses.

He also says the group’s expertise to run and manage shopping malls, hotels and offices would bolster investors’ confidence.

“Owners of the retail shops can capitalise on visitors coming to the shopping mall as they will have to go pass the shops before arriving at the mall,” he explains.

There is also a two-acre recreational park.

Two property analysts tells StarBizWeek that selling prices for the project are rather high considering that it is not a “high end” area.

“The location does not warrant this kind of high prices,” quips one.

Foo says the rate of capital appreciation of the serviced residences will depend on the success of the retail mall.

“The challenge faced by Sunway is to establish a megamall in that locality similar to the success it achieved with the Sunway Pyramid in Bandar Sunway.”

However, real estate investment consultant Gavin Tee Swee Heng says the prices are reasonable, given the amenities and connectivity. Both these features will boost the rental market.

“The live, play and work concept will have a premium. It is a concept that is popular in large cities like Beijing and Jakarta. In Kuala Lumpur, the trend has just started,” he says.

He also notes that the place is good for owner occupiers whereas investors may have to hold the property for three to five years to see meaningful gains.

“Investors might not see immediate returns in terms of price appreciation but they do not have to worry about renting out the units as there will be demand,” he adds.

In terms of progress, phase one is 50% to 60% completed whereas phase two is 20% completed. Meanwhile, work for basement structure of phase three has begun.

The entire project is expected to be completed in 2018.

Source : Star, June 22, 2013

Bank Negara is studying the risks arising from DIBS with a view of potentially imposing curbs on it

PETALING JAYA: Bank Negara is studying the risks arising from the developer interest-bearing scheme (DIBS) with a view of potentially imposing curbs on it, sources said.

Although it is unclear if or when such curbs would be put in place, Hong Leong Investment Bank (HLIB) said that it may be “later this week”, adding that such a move would be a negative for future sales in the primary property market.

Other industry players think that the measures might be introduced in the second half of the year.

DIBS has become a popular easy financing package offered by property developers in joint-promotion activities with banks in recent years.

Under the scheme, buyers need not fork out much initial downpayment to buy properties, as the developer supposedly absorbs the initial interest. This is until the buyer takes possession of the property.

A high number of buyers enter this scheme with the intention of flipping the property when they gain possession of it, making a profit without having to come up with much capital in the process. Such a scenario fuels speculation.

“Typically, under the scheme, buyers only foot between 5% and 10% of the house price upon signing the sale and purchase (S&P) agreement and only begin payment when the project is completed,” a property consultant told StarBiz.

“There are caveats to this scheme, as buyers commit to a financial obligation upon the signing of the S&P and the interest cost has actually been already passed on to buyers via the higher selling prices.”

DIBS is mainly offered to the high-rise residential segment. Some property consultants have opined that the presence of DIBS in the market has caused prices to be set on an artificially higher trajectory.

Notably, the Singapore government banned DIBS in 2009.

“While the exact measures are yet to be revealed, we believe the curbs would impact this easy financing scheme,” HLIB said in a note yesterday.

According to analysts, most of the sales in the recent property bull cycle were tied to the attractive DIBS scheme at the expense of the secondary property market which has remained sluggish. And given the persistent rise in household debt, the Government is mulling over measures to limit it.

“In the recent past, Bank Negara has been compiling information on the scheme and studying its impact on the sector,” a source said.

Bank Negara had yet to respond to StarBiz’s queries as at press time.

“The difference between the non-DIBS and DIBS pricing can range from as low as 5% to as high as 30% if other incentives like early-bird discounts, stamp duty waivers and cash payments are taken into account,” said Elvin Fernandez, managing director of Khong & Jaafar group of companies.

He advocates regulators to compel developers to be transparent on the various incentives, as it may be difficult to do away with DIBS packages.

“Developers should inform buyers and bankers of the actual value of the discounts they are getting so that house buyers know the true value of the house they are buying,” he said.

UOB Kay Hian Research noted that new launches in selective high-rise projects in the suburbs of the Klang Valley were transacted at over RM1,000 per sq ft (psf) vis-a-vis RM450 psf two years ago.

“Household debt has risen to 80.5% of nominal gross domestic product as at end-December 2012, up from 60.4% as at end-2008.

“We also note that outstanding banking sector loans in the household sector has risen 3.6% year-to-date as at end-April to RM638.5bil from RM616.5bil as at December 2012. As the rise in consumer credit is partly linked to housing, curbs may be introduced to dampen speculation,” UOB Kay Hian said in a report yesterday.

On the financial impact of curbing DIBS on property companies, HLIB said that it would be “negative for future sales in the primary market but the extent of damage varies with the degree of exposure to the high-rise segment for each individual developer”.

UOB Kay Hian reckons that if DIBS or similar schemes were to be tightened, it could “significantly dampen new property launches as speculators will be filtered out”.

The company also does not rule out the possibility of a further upward revision in real properties gains tax (RPGT) to dampen speculation.

In Budget 2013, the Government had raised the RPGT for the second time since 2011, stipulating a 10% to 15% tax for the disposal of properties within two years of purchase, and 5% to 10% for the disposal of properties within three to five years. However, properties sold five years after purchase are exempted from the RPGT.

Source The Star, 25 June 2013