KUALA LUMPUR: Shopping centre Real Estate Investment Trusts (REITs) are now facing an uphill battle to recover from punishing pandemic-related declines as Omicron has adds to the industry's uncertainty.
While it is too early to assess Omicron's impact on the retail industry, there are indications that it may act as a lockdown-inducing deadly variant, further reducing retail footfall, rental income, and retail sales until a vaccine to combat the virus is available.
According to industry analysts, year-end holiday shoppers are flocking to stores on weekends this month, indicating that consumers prefer in-person shopping despite higher prices, reduced discounts, and concerns about the new Covid-19 variant.
CBRE|WTW group managing director Foo Gee Jen said there had been a shift in consumer trends, with many shoppers preferring less-crowded Tier-2, Tier-3, and neighbourhood shopping malls to Tier-1 malls.
"While Tier-1 malls are doing 'pretty' decent, more than 50 per cent of shoppers are moving towards neighbourhood malls to avoid crowded city malls," he told The New Straits Times.
Examples of Tier-1 malls are KLCC, Pavilion and The Gardens, while Tier-2 are Sunway Pyramid, Mid Valley Megamall, One Utama Shopping Centre, Setia City Mall, IOI Mall and Empire Shopping Gallery.
Neighbourhood malls are Citta Mall, The Waterfront @ Parkcity, Subang Parade,
Kepong Village Mall and Klang Parade.
"This shift in shoppers trend impacts retailers, and they are now reducing stocks due to lower footfall and the uncertainty impacting the retail sector," he said.
Foo also said that the year-end shopping would see some reduction due to the heightened concern of the pandemic.
Hektar Asset Management Sdn Bhd, the Manager of Hektar REIT, said the prolonged Covid-19 pandemic leading to the imposition of more stringent movement restrictions from May to mid-August 2021 had an adverse impact on the business.
The operating landscape continues to be challenging despite the rebound in economic activities, the company recently noted.
Despite the ongoing concerns, the company is now seeing more visitors to its malls with the easing of restrictions in tandem with the reopening of the economy.
Touching on REITs, Foo said shopping mall REITs are continuously active in engaging and sustaining tenants.
In the US, the retail industry is entering the busiest shopping season of the year, as consumer spending is powering ahead even as the inflation rate reaches a three-decade high.
The question is how much retailers will profit from what's expected to record holiday shopping, Bloomberg reports.
"The new variant is cause for concern, but not a cause for panic," President Joe Biden said after speaking after a meeting with retailers recently about the holiday shopping season and supply chain challenges.
The National Retail Federation (NRF) in an AFP report, cited widespread Covid-19 vaccinations in the US as the driving force in the shift as it reported a drop in overall shoppers in the just-finished stretch but confirmed its outlook for a 'record' season overall.
The group's updated forecast followed an industry survey showing consumer confidence fell in November as inflation and coronavirus cases spiked, while concerns about the latest Covid-19 variant weighed on stocks early this week, the report said.