Overall demand for the property market is now better after a sluggish 2016, but there might be trouble for the retail sector, an international property consultancy said today.

In its report highlight Malaysia's real estate for the first half of 2017, Knight Frank found that while there is still some demand for office spaces and residential properties, the demand for retail was sliding.

"With the increase of supply and competition, malls are facing challenges in sustainability in the retail market. Operators are refurbishing, rebranding and repositioning their malls to improve footfall.

"Fashion and F&B related trades are no longer the key to increase footfall, shopping centres are starting to promote experiences instead of products, such as transforming its car park into an indoor kart zone," Knight Frank's Managing Director Sarkunan Subramaniam said.

The study also found that Klang Valley alone has over 1.1 million square feet of cumulative retail stock but saw sales dipping by 1.2 percent in the first quarter this year compared to 2016.

For high-end condominiums, which has experienced lukewarm response from the market for the past year due to troubled economic times, Knight Frank predicted that things were looking on the upside.

"The recent rebound in the country's economy coupled with the strengthening of the local currency and stable employment market… offers a ray of hope for recovery in the high-end condominium market," Sarkunan added.

Knight Frank found that office spaces, on the other hand, have received a good response as many international companies and multinational companies were clients.

"While in the office sector, the quality of office stock continues to be upgraded to cater to the requirements of large corporates and multinational companies," Sarukunan said.

The recent completion of the Mass Rapid Transport (MRT) will also see a boosted demand for offices along the rail line, Knight Frank's report stated.

It also found that in other states like Penang, Johor and Sabah, there has been slow development in the property markets but things are slowly picking up as the economy improves.

Overall, Knight Frank said the Malaysian property market remains attractive to foreign buyers due to its relatively low entry prices with reasonable returns on investments.

The Knight Frank report researches market performance in various property areas like residential, office and retail and predicted trends and outlooks for the year.