Kota Kinabalu Hit by Oversupply in Retail Space
Shopping malls and commercial centres in Sabah's capital are finding it tougher to gain full occupancy due to rising prices and rigid financing conditions.
Sabah's capital city has begun to experience an oversupply in retail space caused by high property prices and stringent loan application requirements imposed by banks, property experts have warned.
Kota Kinabalu already has some 6.2 million sq ft of retail space with another 1.1 million sq ft to be made available in the next two years, a report by Focus Malaysia said earlier this month.
The situation has triggered doubts about whether sufficient tenants can be found to occupy the units. The city has a population of less than 500,000, translating the retail space there to an average of about 14.6 sq ft per person.
In comparison, certain areas in the Klang Valley have an average space of eight sq ft per person while Petaling Jaya has reached 16 sq ft, the report said.
"Overall, there is an oversupply of retail space in Kota Kinabalu" real estate consultant Stephen Wong told FMT. Citing some examples, he said several shopping malls, especially in the city centre, were already seeing increasingly unoccupied space.
"One Borneo is a big mall and has a lot of retail space, but many retailers have moved out to better places" he said.
"Wisma Merdeka used to be a good place with a lot of demand, but it is now not so. People are leaving because of the high rentals. There's a lot of empty space there now.
"In terms of location, Wisma Merdeka has strong competition from the newer malls like Suria Sabah and Imago" he added. Malls in the suburbs of the city have not been spared.
"Grand Merdeka in Menggatal, on the outskirts of the city, is now offering free rental to attract tenants,' said Wong. "There's so much empty space there despite it having been opened two months ago.â€
Property valuation consultant Angelica Chee said apart from shopping malls, other commercial centres were also facing the risk of a glut.
"There are signs that a glut in retail space is beginning in Kota Kinabalu and also outside the city, such as in the Penampang district" she said.
She said there were also small pockets of development such as commercial shoplots where developers were usually able to sell more than half the space.
"There are buyers (for the units), but when the buildings are completed there are doubts as to whether owners can easily find tenants" Chee said.
"One Borneo and Suria Sabah, considered big malls in the city, are currently not fully tenanted after operating for several years.
"Wisma Merdeka has some empty space on the ground floor where the prime spots are. Usually, it's the upper floors that are not fully occupied" she added.
Chee attributed the oversupply to high property prices and the reluctance of banks to grant loans.
"Property prices are getting higher in the city. When people buy, they want to rent the unit out at a high rate to recoup their investments. Rent-wise, it's not a beautiful scenario" she said.
"The economic slowdown since last year is making it harder to get a loan from banks to buy retail properties" Chee added.
"Banks now have more stringent requirements when approving facilities. They do not necessarily provide financing even if the applicants have money.â€
"Real estate agents are now having a hard time finding tenants for retail space.â€