By Poovenraj Kanagaraj
The arrival of the worldwide Covid-19 outbreak has led to several unprecedented changes, across nations, economies and industries, affecting millions in the process. The impact in the last couple of months in Malaysia has been felt by many , resulting in closures of businesses that left as many as 600,000 unemployed.
The property sector for one has also felt the brunt of the outbreak, with different segments across the sector facing different levels of impacts. The sector which was already facing its own number of challenges prior to the outbreak, soon saw the challenges amplified as a result of the movement restriction that was imposed on March 18.
Hence what used to be an objective and strength have suddenly stopped being a strength because people are not allowed to go to crowded places. Even as we enter a more relaxed environment, the new normal has not allowed us to be in a place of comfort just yet.
The future of retail
Murli Menon, associate director of Savills, says the impact on the retail segment has been more than significant – given that retail is all about interaction with product and service.
“The challenge of facing competitive online platforms had already been building up over the years and the current circumstances has only accelerated the process. Priority and focus of malls and retailers have always been to drive traffic to the stores and malls, and then to offer quality products or services in order to convert those visits to sales,” he says.
The Covid-19 has forced people to learn how to browse and shop online be it for products or for services, Menon says. “And of course expectation levels also change as people start expecting the same hassle-free experience of browsing and check outs,” he says.
There is a need to engage with specialists to ensure proper planning to future proof and right size the retail developments and investments, Menon highlighted.
With the rise of e-commerce in the last couple of years, the fate of the retail segment has been questioned, even more so now with many now favouring the work-from-home trend as well.
“I believe it is good to give flexibility to workers in terms of hours and place of work and we should reason more in terms of task completed rather than hours worked. However, human beings are not a factor of production like electricity or coal, that you can switch on and off. Human beings need social interaction, they can give their best when they are adequately stimulated and motivated, or challenged,” IDEAS senior fellow, Carmelo Ferlito says.
“Regarding e-commerce, I believe the extent is naturally limited. In fact you can use online platforms to sell products, but those products need to be produced first and this has to happen through physical processes of capital combination.”
“I see too much enthusiasm around the “virtual world”, which will never be able to replace the real one,” he tells Business Today.
Menon however believes that both online and offline shopping experience complements each other and are able to co-exist with one driving traffic and business to the other. “Retailers and malls have to therefore stop seeing these as competing channels and work towards making experience on both platforms seamless and similar,” he says.
Usage of data and information on behavioural patterns and preferences will be able to drive up the efficiency of one another, Menon says.
He encourages retailers to continuously engage with shoppers using all possible media of communication and to drive up loyalty through programmes. He further points out that the flexibility of space planning and delivery of products is a critical part of adapting to the changes so that retailers and malls does not end stuck in an infrastructure that loses its relevance.
The rise of short-term rentals and emerging co-living trends
The digital transformation that had seemed to have consumed the retail segment, during the MCO has also caught up with the rental segment. However in this case, SPEEDHOME chief executive officer, Wong Whei Meng says one of the key things he has seen throughout this period is that more people are comfortable renting without physically viewing it.
“I think that will help a lot of people moving to the outskirts from the city center. The ability to view a space for rent via online without having to be there would get more people to even look into short-term rentals,” Whei Meng says, adding that the method would be work with travelling for instance.
Short-term rentals as he says will also see an increase. “Beach houses may become a more suitable choice for short-term rentals than city-center accommodations when people start travelling,” he says.
“The concept have been tried in both US and UK and the bookings over there are proving it as they start to bounce back to pre-Covid levels. People are opting for picturesque spots and cosy locations but do also take note that people are not travelling far, only near,” Meng tells Business Today.
He believes that a similar trend will be seen in Malaysia with less inbound of foreign travel and more driven by domestic tourism.
Another trend that saw a spike in interest during the MCO have been co-living. While the concept is nothing novel, it is however still in its infant stage.
“It’s a growing idea however true co-living entails both lifestyle and services come together. Basically it’s like living in a hotel but in a house. It’s gaining traction but people want to see a whole package,” Meng tells Business Today.
“I think it’s a business model that developers can look into. Perhaps a more innovating take where one can customise the house or even buy a house that is designed for different segments,” he added.
According to Knight Frank, there are no dominant players in the niche market segment. The only prominent co-living space is Co-Coon Co-Living KL by Tan & Tan Developments Berhad.
“Many singles, students or young professional workers find conventional new apartments out of their reach because of high rents, deposits and furnishing costs and co-living can be a more attractive option.
“However, due to the Covid-19 pandemic and until a vaccine is developed, co-living occupancy rates will be impacted as social distancing is very difficult when you are sharing a home with others, some of whom may be complete strangers or transient renters. This drop in occupancy is likely to be short lived and once the Covid-19 crisis subsides, we believe there will be growing interest in this sector,” said James Buckley, Executive Director of Capital Markets, Knight Frank Malaysia Buckley.
Ferlito on the other end says the atmosphere created by the management of Covid-19 and the lockdown will change the trend. “As you can observe by walking in a mall or in the streets, although restaurants have been allowed to operate, most of them are still empty,” he tells Business Today Malaysia.
This he attributes to the lack of confident among Malaysians being in close contact to each other and the government’s communication strategy is still very much centered in fueling a climate of fear with concepts like the “new normal”.
“I think we will observe two contrasting trends. Deteriorating economic conditions will push in favour of co-living and another being the lack of confidence towards interpersonal contacts, which will push in the opposite direction,” Ferlito says.
He opines that in the short run, the second trend will prevail in shaping consumption behaviour, while the first one could emerge once the general atmosphere around Covid-19 changes.