Malls? 50 percent (tough), 20 percent (close) and 100 percent (survivors)

Owning a property just above a mall is an advantage. I would personally like it too because I love shopping. It provides convenience and these units usually come with a premium. These days however, due to the sheer number of new malls within the Klang Valley, it is becoming tougher for these malls to survive. Let’e get real. Even assuming that there are 1,000 units with a full occupancy of 4 per unit, there would only be 4,000 residents living on top of the mall. During the weekdays, half of these residents would be working and during weekends, half of these residents would be visiting other malls. In recent few weeks, I have visited a few newly opened malls. All of them were suffering from low visitor traffic. In fact some of them remain poorly built as there were not even sufficient baby rooms and I think due to cost saving, the air-conditioning was not put at full blast. These are what I think all malls should have. Else, they lose customers like me.
In a recent article in Dato’ Sri Gavin Tee predicted that within 5 years, 20 percent of the malls in Klang Valley would close. 50 percent of them would be struggling to survive within the next 5 years. The good news for the survivors? It may have 100 percent more visitors! Some reasons were given for the dismal performance of malls today and within the next 5 years.

  1. ONLINE shopping – It said that this technological trend will heavily impact the traditional malls
  2. Oversupply – There is little need to look at statistics. Every time I drive from my home to office,  I could see malls every few minutes!
  3. Increased competition – Inability to get good tenants would be squeezing the margins of smaller malls. Giant malls will take 80 percent of all the traffic leaving the remaining 20 percent traffic for the remaining 80 percent of the malls.
  4. Urbanisation – Malls which are not within the public transportation infrastructure would suffer as well as more consumers depend on public transportation.
  5. Closure of retailers – Some retailers suffering from competition with wholesale markets, premium outlets and even online shopping may close. When they close, malls have lesser tenants.

As an avid shopper, both at the malls and online, I do not see online killing off retailers, at least not the bigger ones with huge varieties and not yet so soon. I know many would say we could buy most of everything online but I am not someone who thinks shopping is only about mouse-clicking. To me, it’s also emotional and hey, let’s move a bit and not sitting down all the time!  One thing’s for sure, I would prefer to buy clothes at malls. Plus, I will usually have my meals at the malls too because of the choices. My two kids will be bored if I do not bring them out too. If you ask me today, I would still prefer to own a home close or nearby or on top of a mall. That has not changed. The only change would be to choose wisely because as Dato’ Sri Gavin Tee predicted, 20 percent may close. It’s a negative when we buy a high-rise on top of a ‘dead’ mall.
written on 24 Feb 2017
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  1. Hi,
    I live beside EcoWorld’s New project Eco Spring/Summer & Eco Palladium in JB. They are selling Eco Palladium strata titled retailed units (400 of them over 4 floors). It is a new concept both in terms of selling & attracting future businesses / tenants. Unproven but interesting nonetheless. May i know what’s your view on this project? Judging from this article it seems buy to rent (commercial) is a very risky move.

    1. Hi Eric, I have not been to the said development. It would be good for you to perhaps think about this investment using a few benchmarks. 1) Is the catchment area big enough? (population within 10 minutes from this commercial property). 2) Is there a clear theme for this development or the owners of these retail units would be left to find the tenants by themselves? 3) There should be some anchor tenants. Who are they? Supermarkets / cinemas would be a good addition. 4) Who is the management of this mall? It would be better if the management company is an experienced one. 5) do you have a business that you may want to start? Well, these questions would be a good start, beyond the usual question of ‘can buy or not buy.’ Happy Labour’s Day Eric.

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