S E C T I O N 3 S T R A T E G I C P E R F O R M A N C E 43 MANAGEMENT DISCUSSION AND ANALYSIS RETAIL SEGMENT - KOMTAR JBCC ASSET PERFORMANCE The continued closure of the Malaysia-Singapore border has prevented KOMTAR JBCC’s Singaporean customers from accessing the mall. In addition to this, the various phases of MCO had caused weekday and weekend footfall from the domestic market to drop drastically compared to pre-MCO levels. As a result, tenants recorded subdued business performance, and rental reversions were negatively impacted. Tenant occupancy rates declined to 47% (FY2020: 57%). To retain tenants, the mall management opted to provide rental rebates, which subsequently impacted the mall’s overall contribution to Al-Salām REIT. The prevailing operating environment also hampered efforts to fill up the vacant ground floor space, which has been renovated, as well as efforts to attract experiential brands in F&B and wellness. RESPONSE TO THE COVID-19 PANDEMIC Al-Salām REIT aims to keep all buildings operating continuously and safely. The main objective of the ongoing pandemic response is to reduce transmission to staff, tenants, and visitors. The Fund actively coordinates and manages issues arising from the COVID-19 pandemic and has implemented a programme to regularly clean and sanitise all high-risk areas such as common areas, food courts, lifts, toilets etc. Misting works are carried out 4 times a month, while sanitisation works are done on a daily basis. Visitors are required to scan their body temperature and provide vaccination proof via MySejahtera before entering the mall. If any report of infection of staff or tenants is received, the premises will be closed and sanitisation activities carried out according to the standard operating procedures. CHALLENGES AND PROSPECTS As it will take some time for the retail sector to recover, the general outlook for FY2022 remains challenging. Despite the loosening of restrictions and gradual reopening of public spaces, the shift in consumer habits to digital channels and e-commerce looks to be for the long term. The purpose of visiting a mall post-COVID has changed towards experiential shopping such as dining-in, wellness, healthcare, entertainment, social events, and activities, and the Management is actively seeking tenants in these segments. Therefore, Al-Salām REIT intends to implement a repositioning strategy in the mall, which will include changing the tenant mix. In addition to changing consumer habits, the entry of new shopping malls in the Johor Bahru area has increased competition. As such, we have undertaken AEIs to create an attractive experiential retail environment by increasing the tenant mix in this area. The success of this approach hinges on a recovery in consumer confidence to visit shopping malls. We are cautiously optimistic that the current high vaccination and booster rates will lead to an increase in footfall. Although renovations to the ground floor were completed, we have found it challenging to fill due to the current operating environment. To hopefully counter this, the reopening of the Singapore-Johor Causeway will allow KOMTAR JBCC to tap into the Singaporean market, and this is a key competitive edge. Al-Salām REIT is also collaborating with e-commerce platforms to provide our current and future tenants with omni-channels which will help bolster sales.
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