Testing times for shopping malls

Popular malls in good locations will continue to record full occupancy

PETALING JAYA: With six new projects coming onstream in the Klang Valley next year, the retail property market is expected to see a consolidation in occupancy and rental rates in the next few months.

Retail property consultants said while popular malls in good locations including Suria KLCC, Mid Valley Megamall, Sunway Pyramid and 1 Utama would continue to record full occupancy and business growth, those located in less sought-after areas would face a slowdown.

In its third quarter 2008 retail market report, Regroup Associates said the average vacancy rate in Klang Valley shopping malls rose by a marginal 0.3 percentage point quarter-on-quarter to 7.5%.

Three new retail centres will be completed in the suburbs in the fourth quarter, namely AEON’s AU2 in Wangsa Maju, Giant in Kota Damansara and the Tropicana Mall in Petaling Jaya. They will add 924,000 sq ft of net lettable area to the market.

“Kuala Lumpur registered a higher vacancy of 11.2% compared with the suburbs which registered only 3.9%. The overall dilution in retail because of the major increase in supply, totalling 4.2 million sq ft last year, has dampened the appetite for many mainstream brands,” the report said.



Regroup Associates managing director Allan Soo said there was still room for rental growth in the more popular malls from the current average rate of between RM20 and RM45 per sq ft.

Suria KLCC is commanding some of the highest rental rates in the industry with some prime lots going for more than RM80 per sq ft although its rates average around RM50 per sq ft.

Of the existing 114 retail centres including hypermarkets in the Klang Valley, Soo said only about 20 were good ones, 10 above average and the rest considered under-performing, in terms of retail sales and rental rates.

ECM Libra Investment Research said retail centres in the city seemed more saturated with average occupancy of 88.8% compared with 96.1% in the suburbs.

It said while the Klang Valley market was saturated with the current supply at 38.2 million sq ft, certain suburbs, such as Setapak and Cheras, continued to be under-served.

“The recent entry of institutional investors as owners of retail centres will improve the quality of the retail market in the long run,” it said.

If developers proceed to build according to their plans, a further 4.3 million sq ft will be added in the next two to three years.

Meanwhile, retail consultant and former president of the Malaysian Association for Shopping & Highrise Complex Management, Richard Chan, urged mall owners to upkeep their properties and ensure they are well managed.

“Retail centres are not homogeneous products and there are many factors besides location and demographics that determine their success or failure.

“Successful malls need to be well managed to attract the crowd. Going forward, for malls to be successful they must have good lifestyle elements such as popular food and beverage outlets,” Chan said.

He said suburban malls were gaining popularity with strong occupancy rates of more than 90% for the new malls coming onstream soon. Tropicana City in Petaling Jaya has achieved a 90% occupancy rate while the expanded IOI Mall in Puchong and AU2 in Wangsa Maju are fully leased out.

By The Star (by Angie Ng and Edy Sarif)