Klang Valley – Retail Space Over Supply

I do not believe average income is a good measure when it comes to the ability to purchase property. No developer would be building based on this average too. Most probably, they would take the median income instead if they indeed do their research before building. This is the same reason why retail space should also not be just an average number which is the same for all retail space.  Do you think a mall built by developer A who is very famous and always attracts great brands to go along with them is equal to another mall built by a first timer developer who would have to struggle to get tenants for the mall? Assuming both are 1 million sf mall, I would only calculate the one built by the more famous developer and give a big discount to the retail space offered by the more inferior mall.
If this is the case, why are all the projections always based on the overall forecast increase, the overall forecast demand, the overall forecasted demand? Let’s be real, how many malls do we really frequent in one whole year? Five? Ten? Ten should be the max and there are malls which after you have gone once, it will be your last and you will also help to promote its ‘unattractiveness’ to all your friends, making the mall even worse in terms of number of visitors. There are malls which started with free car parks and once it reaches a critical mass, they would start charging. There are also newer malls which has never made it to become hugely successful, merely able to open, operate and try to sustain. Be reminded, malls are successful if it is operated by the right people and this does not necessarily mean the developer themselves. Many times, even the developer themselves have no such connections to potential tenants and anchor tenant too.
Let’s now look at what’s the projection as per a report in an online article. It said that retail space in Klang Valley will grow from current 55 million sq ft to 80 million sq ft by 2017. Many of these are integrated ones which means that it would normally consists of both the commercial as well as the residential element. This is so that both would support one another. Some includes hotels too. According to the new supply numbers, it should mean cheaper rental rates, right? Well, I just learnt from my car sales agent that he used to rent a small corner in Sg. Wang for RM13,500 per month and that was many years ago. I think the rental itself pretty much sums up the state of demand vs supply for the retail space. Oversupply? Well, many of these popular malls are said to have waiting lists. I know of one in Penang which has increased its rental over a year ago and for those who could not afford to pay, they would have to move out (other malls) or move up (cheaper) and resize (smaller, mostly). Some like Suria KLCC’s are US$10,500 per sq m per annum and yet it’s tenancy rate is 99%. (I seldom visit Suria KLCC, the brands are a little overwhelming for me.)
Conclusion? If we do not think average is the best number, please look at the whole demand and supply equation again. Not all malls are built equal and the supply is certainly not as strong as the numbers may suggest because if it is, rental rates can’t be going up every year even as more malls are being built.    Oh yeah, the year 2017 was mentioned as a year where huge numbers would be coming into the picture. Actually, it’s just 2 years away. For those intending to rent at those popular malls, I wish you all the best. Perhaps, rental rates may just come down? 🙂
written on 26 Jan 2015
Next suggested article: Publika Mall, Small enough and busy enough for me.


Leave a Reply

Your email address will not be published. Required fields are marked *