Cover Story: Mall space growing faster than retail outlets

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SHOPPING CENTRES scheduled to open next year may find it difficult to rent out mall space as retailers plan to be selective when expanding, or have frozen expansion plans until the end of 2015.

Consider that by end-2014, the net floor area of shopping centres in the Klang Valley would have risen by 11.86%. Retail Group Malaysia (RGM) says the total net floor area in the Klang Valley, including Putrajaya, will reach 66 million sq ft, of which seven million sq ft would have been added this year.

Next year, at least 10 more new mall openings are anticipated in the Klang Valley, which will provide another 4.8 million sq ft of net floor area (NLA), adding to the existing 240 shopping centres.

As the cost of business increases and consumer confidence slips, retail margins will be stretched. Will retailers continue to add outlets next year?

Bonia Corp Bhd group managing director Datuk Albert Chiang tells The Edge that the group will be very selective when planning its expansion. The group retails brands like Bonia, Sembonia and Carlo Rino.

The managing director of another retailer, who declined to be named, says his company has already slowed down its expansion. He says he has no plans to open more stores until possibly end-2015. “Our strategy is to not grow [the number of stores]. Why grow when you know GST (Goods and Services Tax) is coming? It would be better to wait until the end of next year before we open,” he says, adding that fellow retailers are suffering as it is.

H C Chan, Sunway Bhd’s CEO of Shopping Malls & Theme Parks, says while the country sees new malls opening every year, the population remains very much the same.

Chan, who is the adviser and immediate past president of the Malaysian Shopping Malls Association or PPK (Persatuan Pengurusan Komplex), points out that based on his observation, the occupancy at some recent mall openings was 50% or below.

He cautions that the higher cost of living, coupled with the implementation of GST and oversupply of retail space, could further burden consumers. “It is a vicious circle [as] retailers who experience an increase in the cost of doing business will pass it on to the consumer.”

On Sunway’s mall openings, Chan says only one, the redeveloped Sunway Putra Mall, is scheduled to open pre-GST in 1Q2015. Sunway Velocity and the third phase of Sunway Pyramid will open for business post-GST at end-2015.

He says Sunway expects to commence business at a healthy level of occupancy because of its proven track record as well as the malls’ location within an integrated development.

Still, there are retailers that will expand. “There are still retailers who want to expand in 2015. We notice that fast-fashion retailers are still keen to expand in quality shopping centres. Foreign luxury fashion brands are also interested in investing in Malaysia.” Fast-fashion brands include the likes of H&M, Mango, Zara and Forever 21.

Moreover, RGM managing director Tan Hai Hsin reckons that local chain store retailers with a strong cash flow position will take the opportunity to expand when more competitive rental packages are offered. “We still see many new F&B concepts being introduced in the Klang Valley,” he adds.

Will new malls be affected because of the slowdown in spending? PPK president Tan Sri Eddy Chen says they will initially attract shoppers, but loyalty tends to grow only after the first few years. — By Vasantha Ganesan

This article first appeared in The Edge Malaysia Weekly, on December 1 - 7, 2014.