More ‘lepaking’ places? 6.58 million sq ft of new malls coming…

This was posted in thestar.com.my just a few days ago: More malls to enter the fray in the Klang Valley. A good friend mentioned that with all these new malls, there will be even more places for people to ‘lepak.’ (places to chill out)  Refer to the image for more information. Image source: thestar.com.my   In order to understand the sizes inside the image, let’s take a look at some existing malls. Paradigm Mall in Kelana Jaya has a net lettable area (NLA) of about 680,000 sq ft. Yea, this meant that it is around 6 times of The Linc and 7 times GM Bukit Bintang for example. The Starling Mall has 451,000 sq ft of net lettable area. So, yea, we can see that many of the malls stated inside the image would be smaller ones, probably to cater to the nearby residents and office workers. The bigger ones with their net lettable areas in bracket include EKO Cheras Mall (625,000), Empire City Damansara (2.3 million), Tropicana Gardens (1 million), Skypark @Cyberjaya (565,000) and Central Plaza @ i-City (940,000).
Moving on with the article, according to Knight Frank in its Real Estate Highlights report, the recent completion of around 450,000 sq ft of net lettable retail space brings Klang Valley’s cumulative supply to 57.5 million sq ft in the first half. It said, “Retail space per capita, analysed at around 7 sq ft per person, is one of the highest in Malaysia. The current concern weighs more on the completed retail stock that have yet to be filled and this puts further pressure on occupancy levels going forward. The Klang Valley retail landscape continues to face strong headwinds and the recent completion of some 450,000 sq ft of space further heightens competition in an already crowded market.”  Perhaps fortunately, Kuala Lumpur City Hall has frozen new approvals for projects and this may help to provide a breather to the oversupplied retail market as it seeks to find its equilibrium.
Before everyone conclude that a bleak future is in store, Knight Franks is still optimistic about the retail market. It says, “Moving forward, Malaysia Retail Association has revised upwards its full-year forecast from 4.7% to 5.3%. The government’s decision to zero rate the Goods and Services Tax augured well for the retail industry and increased demand for goods and services. The Sales and Service Tax may spur spending with lower prices for necessity goods.” Beyond these, the proposed minimal wage will also strengthen purchasing power. It says that, “For the remaining of 2018, retail sales growth is expected to be sustained as consumer sentiment improves with higher purchasing power. We continue to see more consumers turning to online shopping for greater choices, bargains and convenience evident from rapid growth in e-commerce.”  To continue being competitive, Knight Frank suggests this, “To remain competitive due to rising popularity of online shopping, the retail segment has been banking on securing tenants with services and experience factor such as food and beverage, beauty and dermatology and sports and entertainment.”
Knight Frank also provided some data showing that for some popular malls, the occupancy is extremely high; 97-99 percent. Examples include Suria KLCC and Pavilion Kuala Lumpur. Average monthly rental ranges from RM24 per sq ft to RM26 per sq ft. It also says that “In the city fringe, Mid Valley Megamall and The Gardens Mall command average monthly rentals of RM17 per sq ft and RM16 per sq ft respectively. These malls registered 100% and 98% occupancies, with back-to-back tenant movements and renewals.”  The property consultancy said the average monthly rentals for Sunway Pyramid Shopping Centre and The Mines in Selangor were RM14 per sq ft and RM9 per sq ft respectively.  “These malls are 99% and 94% occupied respectively.” Do refer here for the full article. 
Still believing that more malls will mean the doom of all malls? Personally, many malls will not survive but newer malls are not necessarily worse off than current ones. Here’s one earlier article:  Shopping malls will continue to evolve. That’s why they may prosper  We can see from the numbers provided by Knight Frank above that it’s not all gloomy for the retail scene. It’s not everything about the locals yeah. Go to the popular malls and we can see many are tourists and shopping in Malaysia is very attractive because we have many brands which they may not have. Kuala Lumpur is one of the best cities for shopping even when compared to the best in the world as ranked by CNN. In the mean time, keep supporting the shopping scene yeah.
written on 15 Sept 2018
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