KUALA LUMPUR (June 12): Time extensions for new mall completions is to be expected as the government-imposed Movement Control Order had brought construction site and project works to a standstill, according to Savills Malaysia in its Asian Cities Report – Kuala Lumpur Retail 1H2020.

Notable retail malls in the pipeline include the KL East Mall, Setia City Mall Phase 2, The Exchange TRX, Mitsui Shopping Park Lalaport, Pavilion Bukit Jalil, Pavilion Damansara Heights, Warisan Merdeka Mall and IOI City Mall Phase 2.

According to the report, the next two years will see an additional 13.5 million sq ft of net lettable retail space in Greater KL, with the bulk of it or 63.6% expected to be completed in 2021.

The report also notes that investment activity in the sector is likely to slow down and will be limited with muted investor confidence expected for the remainder of this year. “Nevertheless, opportunistic investors may perceive this period as an attractive opportunity to deploy their capital, despite the challenges,” it said.

Meanwhile, occupancy and rents have yet to see signs of adjustments, with average occupancy rate in Greater KL declining slightly by 0.9% to 87.2% in the first quarter, it noted.

“While prime retail malls registered many years of good performance, smaller neighbourhood malls and some recently completed and newly opened retail malls that are poorly located, managed and designed, have been slow to entice sufficient retailers, resulting in average occupancies of less than 70%.

"Despite the declining trend, the average occupancy rate had remained stable, underpinned by well-managed malls. Prime rental is also expected to remain stable, as none of the prime malls have indicated any kind of cut back in rental," it added.

The report also noted that suburban malls with high-rise residential dwelling are recovering faster than city centre malls, as most workplaces in the city centre are operating at reduced capacity, given the continued encouragement of home-based work.

Although the research and consultancy does not foresee massive business closures to happen, at least in more established malls, it said some retail brands may encounter closures as part of their business rationalisation, and small- and local chain stores in particular may cease operations towards year-end.

“Retail leasing activity is also expected to remain subdued, as most brands have put on hold any expansion plans for this year and perhaps even next year.”

As landlords and retailers are emphasising on omni-channel retailing, Savills also expects less window shopping going forward, and for deliveries and takeaways to continue being the preferred options. 

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