Shopping Malls May Incur Loss of RM1.1 – 1.5 Bil, and Retailers RM5.2 – 6.2 Bil during Covid-19 MCO

est. < 1 min read

The 28-day Movement Control Order (MCO) imposed by the government from 18 March to 14 April, necessary to stop the spread of Covid-19, means shopping malls and other retail centres in Malaysia may incur losses ranging from RM1.1 billion to RM1.5 billion.

In the same vein, retailers of non-essential services in malls, who are required to close their operations during this time, may incur losses in sales revenue ranging from RM5.2 billion to 6.2 billion over this period.

Malls

In arriving at the estimate, Stratos Consulting Group has looked into the country wide supply of shopping malls and retail centres (excluding stand-alone hypermarkets), average occupancy, various operational costs, manpower cost and benchmark rentals. It also took into account the press statement released by PPK Malaysia (Malaysia Shopping Malls Association) on 23rd March 2020, estimating the losses of the sector to be RM750 million over the initial 14 day MCO.

The losses to malls assume that rental rebates are provided to non-essential trades tenants during the period of the MCO. Earlier, malls such as Sunway, Pavilion, Paradigm and Bangsar Village  in the Klang Valley; Resorts World Genting, Penang Design Village, Imago Kota Kinabalu, Everrise and The Spring in Sarawak; had initiated rental rebates for the initial 14-day MCO.

PPK said that its shopping mall members would need to curate targeted action plans including any rental rebates, on a case-by-case basis, as many critical factors were involved such as location, business tolerance, owners’ direction and rental structure.

% Distribution of Potential RM1.1 – RM1.5 bil Loss to Malaysian Malls During MCO

The potential income lost from rental rebates are estimated to make up 46% of the total loss to malls.

This is followed by operating expenses (41%) such as electricity and water, as most malls are still partially opened to accommodate essential service tenants such as supermarkets, pharmacies, and food take-away/ delivery outlets.

Losses from manpower cost account for the balance of 13%, as malls still continue to pay wages to staff during this period.

This does not include other losses in income such as car park charges. Already, some shopping malls have waived car park charges during the period.

Retail

Meanwhile, the MRCA (Malaysia Retail Chain Association) had also sent a Stimulus Package Proposal to the government on 20th March, urging various relief measures.

Apart from calling malls and commercial landlords to ease rental rates, it also proposes the following :

  • Minimum 6 months deferment on all statutory obligations such as EPF, SOCSO and other related payments
  • Waiver on utility bills across the board for all industries
  • Quick roll out of soft loans with no collateral, and minimal interest rate (3%)
  • Exemption of sales and services tax for all sectors
  • Double tax deduction to companies for salaries paid to the B40 group, and additional tax deductions for salaries paid to local workers, to encourage continuous employment and reduce possibility of jobs retrenchment
  • Lower corporate tax rates for directly affected industries such as Tourism, F&B, MICE and other related industries
  • Waiver of Tourism and Entertainment tax

Coordination among retailers and shopping mall operators to work out a win-win solution, is essential and provide a beacon of hope to the nation that it can brace through the current challenging times. It is hoped that the coordination, coupled with appropriate government assistance, will ensure the continual supply of goods and services and the preservation of jobs in the mall and retail sectors.

In the same vein, Stratos is committed to provide meaningful analytics in the service of the public and the retail sector, as we weather this storm together.

 

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