pg. 27 Business Overview Integrated Annual Report 2025 OPERATING ENVIRONMENT Operational costs are facing significant upward pressure from national policy shifts, including reductions in fuel subsidies, higher sales and service taxes (“SST”), and the implementation of higher minimum wages. These inflationary factors put pressure on margins and affect tenants’ overall affordability. In view of this, the REIT is constantly monitoring operational efficiencies, including monitoring energy usage, taking longterm measures to manage utility costs, while balancing value-enhancing AEIs to common areas in KOMTAR JBCC and Menara KOMTAR to ensure shopper comfort, strong footfall and tenant satisfaction. Operational Costs and Inflationary Pressures Rising energy costs and increasingly stringent regulatory requirements have made ESG and energy efficiency a core business imperative. Electricity tariffs were raised by 13.6% in 2025 following the launch of Tenaga Nasional Berhad’s (“TNB”) Regulatory Period 4 (“RP4”), setting the price at 45.4 sen/kWh up to 31st December 2027. Fuel prices have also fluctuated, with fuel subsidy regulations becoming more stringent and RON97 prices increasing nationwide to RM3.28 per litre. Furthermore, there is a growing demand for sustainable operations that enhance long-term asset resilience, differentiate the REIT in a competitive market, and ensure continuous alignment with evolving sustainability standards and regulatory requirements. Al-Salām REIT has integrated these initiatives by adopting Green Lease clauses in new agreements, installing solar photovoltaic (“PV”) systems at @Mart Kempas, with plans to expand its implementation to the rest of the REIT’s portfolio, and achieving Green Building Index (“GBI”) certification for its primary urban assets. In tandem with green building initiatives, the REIT implemented various energy and waterefficiency measures, increased engagement with regulatory bodies, and consulted external experts to ensure continuous alignment of all operations with these standards. ESG Integration and Energy Efficiency The momentum generated by the JS-SEZ and the Ibrahim International Business District (“IIBD”) serves as a vital catalyst for Johor Bahru’s urban and economic upgrade. This change has fuelled increased demand for office assets and commercial spaces in the central business district. Al-Salām REIT is strategically aligning its portfolio to capitalise on this opportunity by leveraging its flagship assets, KOMTAR JBCC and Menara KOMTAR, strategically located within the IIBD, to capture strong footfall and tenant demand. The REIT is also pursuing potential assets which are a strategic fit for the portfolio and reducing non-core segments in a focused approach to establish a clear identity as a diversified retail REIT. Economic Zones and Urban Rejuvenation Consumer behaviour in the retail sector is rapidly shifting toward urbanisation and digitalisation, with a growing preference for experiential retail and omnichannel shopping. This is reflected in the 35% increase in e-commerce shoppers, representing 62% of the Malaysian population using online platforms in 2025, up from 46% the previous year. The ongoing global technology development also presents unique opportunities for the commercial and industrial segments. The REIT adapts to this trend by strengthening its tenant mix to include premium F&B brands and delivery services that cater to mobile, lifestyle-oriented consumers, while onboarding digitally equipped retailers to future-proof its mall offerings. Consumer Behaviour and Digitalisation
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