An unconventional blueprint for success

This article first appeared in City & Country, The Edge Malaysia Weekly, on November 6, 2017 - November 12, 2017.

Sunway Pyramid celebrated its 20th anniversary this year. It is a key driver to Sunway City and it will continue to attract locals and tourists.” — Ng

Ng (third from left) with The Edge Media Group publisher and group CEO Ho Kay Tat, EdgeProp.my managing director and editor-in-chief Au Foong Yee and City & Country editor Rosalynn Poh

Sunway Pyramid was valued at RM3.45 billion as at June 30 this year

It features a convention centre, four themed precincts, a 12-screen cinema, Malaysia’s first in-mall ice rink and four themed atriums

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Excellence in Suburban Family Mall  | Sunway Pyramid | Sunway Real Estate Investment Trust

Known as the country’s first themed shopping and entertainment centre, Sunway Pyramid in Sunway City is bold and unorthodox. From its eccentric, Egyptian-inspired architecture to its themed precincts, it has grown into one of the most recognised shopping malls in the region.

As its name suggests, it has a pyramid-shaped façade, with a huge lion head entrance that has become a signature landmark of the township. Opened in 1997, its popular retail outlets, restaurants and entertainment components attract tens of thousands of patrons every weekend.

Developed by Sunway Property, the property division of Sunway Bhd, Sunway Pyramid has maintained its popularity over the years and transformed the once quiet township into a bustling retail and entertainment hub. The mall had a footfall of more than 37 million, as at June 30.

Sunway Property’s decision to go against convention is one reason Sunway Pyramid was picked as one of the winners of The Edge Malaysia Property Development Excellence Award 2017.

“The mall celebrated its 20th anniversary this year. It is interesting how a mature and established mall like Sunway Pyramid continues to stay relevant in the marketplace. It is a key driver for Sunway City and it will continue to attract locals and tourists,” says Datuk Jeffrey Ng, CEO of Sunway REIT Management Sdn Bhd, in an email interview.

Sunway Pyramid is managed by Sunway REIT Management Sdn Bhd, one of the largest, retail-focused real estate investment trusts in Malaysia. The REIT achieved a gross revenue of RM522 million and a net property income (NPI) of RM388 million, as at June 30.

Sunway Malls and Theme Parks CEO HC Chan explains why Sunway Pyramid stands out. “Back in 1997, Sunway Pyramid was built with the foresight that there was an absence of themed malls in the country. Most mall developments [back then] were contemporary and modern in their architectural approach. Founder and chairman of Sunway Bhd Tan Sri Dr Jeffrey Cheah saw the potential of filling this untapped market,” he says via email.

“The creation of this themed mall gave us a clear differentiation and brand positioning. It stood out and made a significant mark in the shopping mall industry.”

He adds that the Egyptian theme is consistent with the existing offerings of Sunway City’s other components, particularly Sunway Lagoon and Sunway Resort Hotel & Spa. “Holistically, this makes sense and created a seamless themed experience among the three business components.”

Sunway Pyramid was valued at RM3.45 billion (RM1,952 psf) as at June 30. Phase 1 was completed and opened in July 1997, while Phase 2 was completed in September 2007. The shopping mall has a total of 15 levels, including four levels of retail, 766 tenants and 1,767,487 sq ft of net lettable area (NLA), as at June 30.

It features a convention centre, four themed precincts (Fashion Central, Asian Avenue, Marrakesh, Oasis Boulevard), a 12-screen cinema, Malaysia’s first in-mall ice rink, and four themed atriums (Pyramid, Orange, Blue and Ice Rink). The mall also offers seamless connectivity to Sunway Lagoon, Sunway Pyramid Hotel and the new Sunway Clio Hotel.

Steady performance, strong returns

Sunway REIT’s Ng says Sunway Pyramid has been performing steadily and giving solid returns. “The average occupancy rate has been steady in the past five financial years. In FY2017, the average occupancy rate stood at 98%. Technically, this is close to full occupancy as it is common to have marginal vacancy arising from tenants’ movement and renovation. We expect such occupancy to be sustainable.”

According to him, Sunway Pyramid has registered healthy rental growth over the years. “Rental has grown by 30% over the past five years. Moving forward, we do expect the rental revision growth rate to moderate, in view of the high base effect and more competitive operating environment.”  

“The mall has demonstrated its resilience over the years, including crisis periods such as the SARS [outbreak] and global financial crisis. We are confident it will be sustainable in the future and that we have the competitive edge. In addition to the large residential catchment of 1.6 million at Sunway City, the integrated township created a captive market with businesses benefiting the mall. This catchment supports the business of the shopping mall,” he says.

According to him, the mall’s enduring appeal is due to a number of factors. “Sunway Pyramid is managed by a team of experienced mall professionals. It is important to be agile with trends. We continuously identify low-hanging fruit in the mall to drive more footfall.”

Chan says the success of Sunway Pyramid lies in its brand awareness. “A key contributor to its sustainable success has been the careful curation of its brand over the last 20 years through various brand awareness and enhancement exercises. As a result, Sunway Pyramid has become a household name.

“Today, shopping malls generally have gone past just being functional. It has become increasingly experiential due to higher consumer expectations and lifestyle changes. We recognise this is an important factor to continue to be relevant,” he adds.

“We are strategising to see where we can add value to the entire journey experience of our shoppers. Of course, all these will strengthen our branding further. This translates into better footfall and consumer spending.”

Challenges

One of the challenges Sunway Pyramid faces is the ever-growing competition. “If we look at Malaysian Shopping Malls Association (PPK) figures, of the 550 malls in the nation, 50% are located within the Klang Valley. This gives you a snapshot of how crowded the market is. From National Property Information Centre (NAPIC) 2016 figures, when we look at retail space supply, we see that Selangor and Federal Territories emerged tops with a cumulative retail space supply of 68.1 million sq ft, constituting 43% of the total retail space supply nationwide (157.6 million sq ft). This gives us an idea of how intense the competition is,” says Chan.

“Market share and visitorship are two indicators that are constantly under seige. The growth in malls has resulted in homogeneity to a certain extent. Unless it is clearly differentiated and niche, there is no compelling reason for repeated visits by patrons,” he asserts.

Chan adds that online shopping and technology advancements have impacted the shopping mall industry. “In the last 20 years, we have witnessed the changing of retail formats and consumer preferences. Competition was not as intense as it is today. It is not limited to traditional mall players but has extended to online shopping.”

“The advancement in mobile technology, smartphones and mobile data have allowed disruptive technologies to enter the market and reshape traditional retail formats. E-commerce and online shopping have seen growth although spending per customer is still low. According to Euromonitor, online retail sales increased from RM1 billion in 2011 to RM2.4 billion in 2016, with an annual growth rate of 18.5%. In contrast, store-based retail sales achieved an annual growth rate of 3.2%.”

“Shopping malls are no longer just contending with physical space but virtual space as well [that goes after the same retailers]. Coupled with changing shopping habits where online purchase is making inroads, one can see how this is impacting malls,” says Chan.

“However, we do see the convergence of both online and offline at some point. Amazon and Alibaba, both pure-play e-commerce companies, have made the effort to have a bricks-and-mortar presence. Online is convenient, fast and possibly cheaper while offline offers socialisation and engagement of the five senses. Shopping malls can capitalise on harnessing these aspects. In that sense, a trip to the mall will have a different meaning and dimension — the purpose or type of trips to malls will differ in years to come.”

F&B remains an important aspect of Sunway Pyramid. “A trade category that has been able to harness the social aspect is F&B. While satisfying a basic need, dining serves to fill a higher need for entertainment for consumers. Here, we see the shift as close to 25% to 30% of a mall’s net lettable areas are F&B driven as opposed to 20 years ago, when it was in the single digits,” says Chan. “The leisure and entertainment category, such as cinemas, karaokes, health massage centres and so on are contributors to the experience as well.”

According to Ng, traffic congestion is something that needs to be addressed. “An issue we often encounter is traffic congestion during peak hours. This is certainly not uncommon to successful retail malls in Malaysia. We are exploring further improvement to the road and transport infrastructure, and improving accessibility to Sunway City,” he says.

Future plans and opportunities

According Sunway’s Ng, the company sees some opportunities for Sunway Pyramid. “We see opportunities to continuously enhance and evolve the tenancy mix, embrace technology in our business and reach out to a wider market, for instance through social media.”

Sunway REIT recently announced the proposed acquisition of Sunway Clio property comprising a 401-room 4-star rated Sunway Clio Hotel and a retail space (extension of Sunway Pyramid, or commonly known as Sunway Pyramid Phase 3), measuring about 88,000 sq ft.

“We are confident that Sunway Pyramid (after the inclusion of Phase 3) augurs well for the shopping mall, due to additional car parks, retail space and direct connectivity. Sunway Pyramid will also benefit from additional footfall from the hotel,” says Ng. He adds that there are plans in the pipeline for expansion of Sunway Pyramid 

Phase 4 over the longer term. Details will be revealed when plans are firmed up.

Meanwhile, Ng has a positive outlook for shopping malls. “The retail industry recorded an encouraging growth of 4.9% year on year in 2Q FY2017, after a contraction of 1.2% y-o-y in 1Q FY2017. Retail Group Malaysia (RGM) revised its annual growth forecast downwards from 3.9% to 3.7% for the Malaysia retail industry in FY2017 on the back of lower purchasing power. It further stated that full recovery of the Malaysian retail market is highly dependent on external economic demand and ringgit performance for the rest of the year. Despite the downward revision in forecast, it is still a stronger growth momentum compared to FY2016’s retail sales growth of 1.7%.”

“Notably, a gradual recovery in consumer sentiment in 1H FY2017, coupled with an improvement in the macro-economic landscape, is expected to bode well for the retail industry,” he concludes.