Challenging environment faced by retailers
Published on: Monday, July 08, 2019
Text Size:

PETALING JAYA: Retailers will continue operating in a challenging environment as the retail industry evolves to meet the demands of millennial shoppers who are poised to be the biggest spenders in the future.

“Retail is no longer solely about e-commerce versus physical stores. 

It is a combination of both, providing millennials with in-store experiences along with the ease of shopping online. 

The days when retail malls could depend on big, popular brands to attract shoppers are now gone,” said Savills Malaysia.

Aged between 19 and 35 years, the millennial population in Malaysia in their prime spending years is estimated to account for 29pc or 9.4 million people of the total population.

In its report on Kuala Lumpur Retail, Savills said that the presence of more retail malls in Greater Kuala Lumpur (KL) would further dilute the market as most malls will be offering similar goods and services.

“This means that retailers will continue operating their businesses in a challenging environment. Food and beverage offerings remain the main crowd-pullers, attracting footfall while providing venues for social as well as economic interaction,” it said.

Looking back at 2018, total retail supply rose 3.1pc year-on-year, driving total retail stock to 64.3 million sq ft with suburban areas maintaining the highest market share (82pc) in Greater KL.

According to Savills, new supply of retail space rose by two million sq ft last year, driven by seven new completions namely Parkson M Square, Evo Mall, KL Eco City Mall, Eko Cheras, Kiara 163, Shoppes @ Four Season Place and GMBB.

“Incoming mall supply in Greater KL is projected to grow at a compounded annual growth rate of 7.6% from 2018 to 2022. Despite consumers’ cautious approach to retail spending, new mall openings continue unabated,” it said.

This year, Greater KL will see the completion of 4.8 million sq ft of lettable retail space with major projects being Tropicana Gardens Mall in Kota Damansara and Central i-City in Shah Alam, which opened in April.

Existing stock is estimated to reach 78.4 million sq ft by end of 2022, if all 18 projects under construction are completed on schedule.

Savills said the abundance of pipeline retail space has spurred retail mall owners to re-evaluate the vital factors that attract shopper traffic namely, location, connectivity, concept, target market, tenant mix, car park spaces, security and cleanliness.

Lendlease’s The Exchange Mall, Pavilion Damansara Heights, Mitsui Shopping Park Lalaport and Pavilion Bukit Jalil are expected to greatly affect the performance of the older, less trendy retail malls.

“The current intense competition from new retail malls has already led to some older malls experiencing declines in footfall due to their limited selection of retailers and product offerings, and in some instances, poor management and maintenance,” said Savills.

The average occupancy rate of retail malls in Greater KL rose slightly to 87.8pc last year but it was still below the 90pc mark set in 2015.

While well-established prime regional malls and megamalls have maintained high footfall with average occupancy in excess of 90pc, neighbourhood malls and some recently opened malls have struggled to reach high occupancy rates on opening due to the large availability of locations for retailers to choose from.

“Retailers are taking this opportunity to carefully assess suitable timings and locations for new stores. Most of the new retail malls opened since 2017 have been slow in attracting a sufficient number of retailers, resulting in an average occupancy of less than 80pc,” said Savills.

Meanwhile, small and mid-sized neighbourhood malls that are over 20 years old have been able to maintain solid occupancy of above 85pc due to their locations, which are all in densely populated areas.

These malls include Ampang Point, Cheras Leisure Mall, Bangsar Shopping Centre, IOI Mall Puchong, Subang Parade, Amcorp Mall and Plaza Alam Sentral.

At the same time, tired-looking retail malls are stepping up by undergoing refurbishment and repositioning to meet ever-changing consumer behaviour and retailer requirements. 

The prime retail index stood unchanged at 227 points last year while prime rents for malls in Kuala Lumpur city such as Suria KLCC and Pavilion KL are said to have hit a high range of RM220 and RM110 per square foot (psf) per month respectively.

Average prime rent for 1Utama and Sunway Pyramid stood at RM55 psf per month while Mid Valley Megamall commanded rents as high as RM80 psf per month.

Savills noted that rental discounts in new projects have restricted rental growth in non-prime areas given the large amount of retail supply, with landlords using monetary incentives to entice established tenants to open stores in their retail malls.

Nevertheless, it expects stable rental levels across all prime retail segments despite the challenging retail environment. – theSun Property

Featured Listings

Kristal Condo

Rental Price: RM 3,200
Location: Kepayan
Build up area: 1,765 sq. ft.
Bedroom: 3
Bathroom: 2

Jesselton Residences

Rental Price: RM 3,500
Location: KK Town
Build up area: 965 sq. ft.
Bedroom: 2
Bathroom: 2

RBF 4 Warehouse With Office

Rental Price: RM 10,000.00
Location: KKIP | Sepanggar
Build up area: 4,000 sq. ft.
Land area: 9,000 sq. ft. 

Other News

Follow Us  

Follow us on            

Property Top Stories