22 January 2013

Things to Note When Investing in Retail Shop Lot

Not too long ago, I purchased a shop lot in Imperio Mall, Malacca. A lot of my friends told me I was crazy to buy a tiny unit with overpriced tag. I would like to share with you things to note when purchasing a retail shop lot:

  1. Compare the Rental Yield among the peers first. Rental yield is the most important factor I could think of. In order to sell your retail lot in faster way, it is good to have a retail lot with tenants. To get a good tenants, location and quality of management are important factors. In Malacca, the best retail shopping mall I could think of is Mahkota Parade, which is in the center of the Melaka Raya, CBD area of Malacca state. However, we should not neglect the quality of the management, in order to achieve a good long term rental yield. You could easily get the figure from well known property website such as mudah.my, propertygury.com.my, and iproperty.com.my etc,  
  2. Compare the Selling price among the peers too. You should also understand the selling price too. Different size of retail lot has different price tag. Some retailers require big rent-able size, while most require smaller size. You have to have your own targeted group. Normally you will get a more stable income via Food & Beverages tenants, especially if they are some established companies, so you do not worry of late rental payment. For me, I would start small by purchasing a 228sft unit, and hopefully think that I could get RM100 per day rental income. Anyway, as far as my concern as a business owner, I do not hope my rental payment cost me more than 20% of operating cost, and if I am targeting at least 50% gross profit, it means that I should achieve at least RM1,000 per day income from the shop lot that I rent for. While it is uncertain to guess whether my tenants could get RM1,000 sales per day, so I could only pray god and hope it is a good choice. In Mahkota Parade (hottest spot in Malacca now), some could get at least RM30 psf, but some is at RM15 psf. I also knew that Hatten Square is now not having a good business due to lack of supports from locals for IT products, and normally visitors are not targeting at IT products. Nonetheless, with recent opening of Hatten Hotel just above the Hatten Square, I hope that it can bring in more crowd. With two famous hotels - Ibis and Two Tree, I hope that this project can lure more middle class and above guys to come over there. 
  3. Quality of Management - It is a very bad move if you buy a retail shop lot without checking background of the developer. There are few abandoned shopping malls in Johor Bahru city, such as Kemayan City and Pacific Malls due to lack of good management. So if you are really want to buy a retail shop lot, please double check whether the developer is capable enough to make it success. The developer also should be the stakeholder (e.g. one of the shop lot owners) to make sure this project can be success in long run. You can see now many developers turn to be a REIT player, to ensure the shareholders can have a good return and the shopping malls can have a better management plan + occupancy rate. 
  4. Accessibility. In Malacca, most of the locals there are earning average income (for those who are not a business owner near tourist attraction). So it really depends on tourists to help to boost the retail sales there. So far, Malacca is only famous of its 600 years history of development, and many tourists who visit West Malaysia must come there to truly understand the history of Malaysia. F&B is definitely earning great there as most of the tourists must eat the famous local food there while traveling. If this is the case, it is wise if we can setup a F&B outlets near tourist attraction. I am not too sure if visitors come and buy fashion clothes in Malacca, as more will prefer bigger cities like Kuala Lumpur and Penang. Unless the developer can make a change , else it is quite an aggressive move to have luxury shopping malls such as KL Pavilion or Star Hill Lot 10 in small city in Malaysia. 
  5. Future Ongoing Plan for the whole City - Government's push and private investment are two key factors when developing a city. So we should keep track how local government to push for development in the city, as well as to check on demography changes (e.g. Average Income Increase etc) to check on sustainable growth rate. 


38 comments:

  1. I also purchased a shopping lot at hatten city elements mall last year.

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  2. Hi Rachel,

    Mind to tell me psf you bought at? I was around 2,100psf, which my friends told me that I was crazy. :P

    Nonetheless, I am conservative optimistic on Malacca property market, especially retail due to tourist attraction.

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  3. Hi Jack,
    Hatten city elements mall, Rm 1751psf, 213.8sqf, level 8.
    Is it good buy? I've paid 10K booking fees.

    ReplyDelete
    Replies
    1. Hi, I am not very sure of Elements Mall, but I believe that it could be a new place to go in Malacca, especially in the hot days. Please bear in mind that it may take several years for a new retail mall to obtain near to 100% occupancy rate.

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  4. Hi Jack,
    May I know on which floor your unit is located?
    Now the min price for 200++sqft units left is around 2600/sqft.
    Is it a good buy for unit near to the link bridge?
    Tx.

    ReplyDelete
    Replies
    1. Hi, I bought a second floor unit. I am not sure your purpose of purchasing imperio mall, but as long as the rental can catch up with inflation, then I believe it is still a good buy. BTW, its medium-high risk of buying a retail unit, as it takes longer time to get the malls fully occupied, unless the management put in more efforts, which I believe this is in the case, as developer keeps the basement & ground floor for their recurring income model.

      Delete
  5. Hi Jack,

    Your articles are interesting. I bought a unit @ Imperio Mall recently.
    When you will go to apply for bank loan?

    ReplyDelete
    Replies
    1. Hi Kelly,

      I asked the staff there. They are still in the midst of finalizing the list of the banks that we can apply to. However, I understand from the S&P that we can actually go out to look for loan inquiries once we got the S&P. I believe you have gotten the S&P documents. Please share with me too if you have any progress at your side. Appreciate it.

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  6. I am looking at Vedro mall now. Is it a good investment? I think location is good for tourist.
    Left basement and 2nd floor. Which is better?

    ReplyDelete
    Replies
    1. Hi Hui Koon,

      Sorry for reply late. I believe that the basement maybe a better choice compared to 2nd floor (if everything remains the same for most malls).

      After several rounds dealing with Hatten staffs, I believe that they are all very energetic and aggressive in billing up their revenue across Malaysia. Now they even venture in to Tampoi, JB.

      Delete
  7. Hi, I chanced upon your blog and would like seek your advice. I am interested in Capital 21 by Hatten Group in JB. Any advice will be greatly appreciated

    ReplyDelete
    Replies
    1. Hi, from what I know is that, this is the first venture to Iskandar Malaysia by Hatten Group which joint venture with another 2 developers. I would suggest you to come to the real site to check. There are some high rise projects over there with one main road junction nearby. Nonetheless, it is still very hard to say whether it could bring to the success as it requires a lot of efforts from the manager to bring more crowds over there.

      So far, the location is not that good compared to Angsana, the nearest shopping mall. I believe a lot of the people would need to take their own transports instead of public transports over there. Please check if there is ample parking lot for visitors.

      Though I'm not vested in Capital 21, but I do hope it would bring success to JB market. The latest opening of shopping mall is JBCC which is just besides City Square @ JB Sentral. Hope more branded outlets to be opened here.

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  8. Also what is The average rental yield like for retail in JB

    ReplyDelete
    Replies
    1. From what I know from Sutera Mall @ Skudai (Suburb of JB), it's about RM10-15 psf, but for City Square (the nearest shopping mall to JB custom), the rental is very high.

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  9. Anyone knows the market price now psf for Imperio mall?

    ReplyDelete
    Replies
    1. Hi, I'm not too sure of any transacted resale lot. You may check with Hatten marketing team for straightaway answer.

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  10. I got a unit at Imperio Mall, is great to know finally who purchased the property together with us too.

    ReplyDelete
  11. Replies
    1. Hi, that is great. Is there any target completion date given? Mind to tell me average psf for Vedro unit?

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    2. hi,now they are claimimg 60% completion.

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  12. Hi, may i know you loan from which bank for imperio mall ?

    ReplyDelete
  13. Hi jack,

    1. I already book a small lot in Element's Mall..May I know which bank loan will easily get approval??How much percentage can be borrow??
    2. If I already sign for S&P and unable to loan from bank...Did I get any forfeited amount??

    Thanks for your advice & I am first time buyer that no nothing..

    ReplyDelete
    Replies
    1. HI Anonymous, kindly to check are u buying retail lot or kios lot in Elements Mall @ Melaka? So u get the bank loan?

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    2. Helo..ya bought a small retail lot in level 8 ..elements mall..bank loan approved..u also bought a unit too??

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    3. Can i check which bank approved? Coz i got friend wish to consider to buy. Can i know what is the sqf u bought?

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    4. Helo..Pbb ..214sqf..a small area..u can try for uob or pbb..as I knw bank haf quota too..

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    5. Thanks for reply. I already checked both banks, they didn't accept loan application for this Kiosk anymore.

      Delete
  14. they are bad.
    when you buy everything is ok.
    when i sell back thing will be bad.
    i got bad experience. be careful.

    ReplyDelete
    Replies
    1. Mind to share your experience ?

      Delete
    2. What bad experience u get from them?? Mind to share out?? Tq..

      Delete
  15. Did your unit also subject for LAD ?

    ReplyDelete
  16. Anyone invest in melaka raya 21 3 storey shop office
    How is the property there any prospect?

    ReplyDelete
  17. Anyone invest in melaka raya 21 3 storey shop office
    How is the property there any prospect?

    ReplyDelete
  18. Good luck in all ur investments with hatten group. There are many issues with elements mall and silverscape now. Imperio mall is being build by some china engaged contractor, really all the best for you all who purchased imperio. They are way back in schedule, financial is getting weak therefore engage china contractor to complete the construction with low cost (lousy quality) to complete every stage faster to collect money. And within 2km radious there is 7 shopping malls, do you think elements mall, imperio mall and haarbour city mall can be fully tenanted. Not to even forget another mall adjacent at Pulau melaka. Their sales person are always mentioning about the guaranteed return to confused you all. What happens after that. They even promised buyers that hatten will buy back the suites at market value. Trust me, there is no free lunch in this world, get a black and white for it. Anyhow, you are already buying future price thats why you will never be able to get 80 - 85% loan. Do not want to elaborate more as there is too much to say.

    ReplyDelete
    Replies
    1. They elect NOT to exercise their right to purchase the retail lot back at market price... What a load of bullshit... They basically just don't give a damn about buying back the shit they built... I asked them to give me a counter offer ... they don't even want to entertain me further, just kept sending me legal bullshit cut out from the Tenancy Agreement... Not happy...

      Delete
  19. What is the average rental price for a 3 storey shop office at melaka raya 21 thanks

    ReplyDelete

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