‘Proper retail mix’ ensures success of shopping malls

Shopping malls, Retail property

By THE STAR

PETALING JAYA: The oversupply of retail malls in Malaysia seems to be a rising issue now with the industry not only witnessing similar tenancy mix and offerings but also sudden closure of businesses while some postponing their openings.

Weak consumer sentiment, intense competition for tenants and changing consumer preferences and behaviour are some the factors that has resulted in the shopping mall business to come under pressure, according to reports.

Despite all that pessimism, Suria KLCC executive director and chief executive officer Andrew Brien believes that malls will continue to do well if they are developed in the right location and has proper retail mix.

With over 23 years of industry experience, Brien told StarBiz that while the oversupply was obvious, there were too many “poor” malls in the Klang Valley.

“The retail occupancy in the Klang Valley are in the range of 78% now compared to the historical figure of 90% and above.

“There are too many ‘poor’ malls and our retail developers and partners need to be cognisant that we don’t need to build malls everywhere but ensure that it is in the right locations,” he said.

The success of a mall was all about bringing in sales, he said, adding that retail mix, overall offerings to customers, location and accessibility played a pertinent role as well.

He also believes that having cheap rent will not be sustainable for the business in the long term.

It was reported that occupancy and average rental rates for malls in Kuala Lumpur and Selangor had suffered last year.

To add to that, data from the National Information Centre as at end 2015 showed that Malaysia had 148.85 million sq ft of existing retail space, with another 16.2 million sq ft incoming and a further 11.08 million sq ft being planned.

In the Klang Valley alone, there were 241 shopping centres with 64.1 million sq ft of space, with average occupancy of 80.4% in the same period, according to reports.

Brien did not disclose Suria KLCC’s rental rates due to disclosure policies.

But the leading retail asset management group’s rental reversion rates was reported to be healthy at about 3% to 4% (year-on-year) and averaged about RM30 per sq ft as at the second quarter of 2016.

Its second-quarter occupancy rate fell to 96%, from 98% in the first quarter of 2016, likely due to the reconfiguration of the mall’s Level 1 to a men’s luxury precinct.

But this would likely pick up as new brands were being brought on board, while retail sales was in the healthy range of 8% y-o-y despite the challenging environment, said the report.

Meanwhile, Brien said the group was still seeing single-digit growth in all its malls despite the cautious consumer sentiment.

Operating a retail was complicated, he opined, because it relied on the right retail mix, attracting the right customers, good consumer marketing and ensuring that the asset was well maintained.

“In retail asset management, it’s not just about building space and leasing. It has to be customer-centric. You have to know and understand where the gaps are in the market,” he added.

Suria KLCC Sdn Bhd has three malls under its portfolio – Suria KLCC, Alamanda in Putrajaya and Mesra Mall in Trengganu.

The moving annual turnover of retails at Suria, taking into account seasonality at KLCC, was about RM2.5bil from Aug 1, 2015 till July 31, 2016, while Alamanda achieved about RM433mil and Mesra about RM120mil.

With a net lettable area (NLA) of 1,172,730 sq ft, Suria KLCC attracts over 45 million visitors per year, followed by Alamanda and Mesra, each bringing in over 12.5 million and 5.1 million visitors. Alamanda has a NLA of 592,115 sq ft and Mesra 220,993 sq ft

“Pulling over 60 million people per year in all our malls is an impressive figure,” he noted.

In terms of foreign visitors, Brien said this had remained constant over the last decade. In fact, Suria KLCC takes the lead among other malls in terms of average spend by foreigners.

“Since Malaysians are well-travelled people, it is important for the group to look into their needs and we have over the last decade changed almost 380 retail stores in Suria,” he said, adding that the group had invested a substantial amount for the ongoing refurbishment of Alamanda.

Brien said a new development was underway that could see about 340,000-sq-ft retail podium, a 75-storey office towers and a 54-storey five-star business hotel being developed at a site known as Lot 185, adjacent to Suria KLCC.

“Slated for completion in late 2019, this mixed commercial development is a joint venture between KLCC Holdings Sdn Bhd and Qatari Investment Authority,” he said, adding that Suria KLCC would be the retail operator.

– Malaysia Property News

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