This article first appeared in The Edge Malaysia Weekly on January 24, 2022 - January 30, 2022

IF the occupancy rate and performance of Sunway Malls in the final quarter of 2021 is anything to go by, the challenges faced by the mall owner cum operator since the start of the pandemic may well be over. Preliminary figures show that in 4Q2021, Sunway Malls — which operates a total of seven malls in the Klang Valley, Johor and Penang — enjoyed traffic and sales levels that matched that of 4Q2019. This bodes well as it recorded its highest sales ever then.

But arguably even more convincing is the return of retailer confidence. Last year, Sunway Malls saw average occupancy at its seven malls, which have a total net lettable area (NLA) of 4.77 million sq ft, reach 96%. This is no mean feat as retailers are spoilt for choice given the recent deluge of new mall openings, including Pavilion Bukit Jalil on Dec 3 and The Mitsui Shopping Park Lalaport Bukit Bintang City Centre on Jan 20. And even more competition is on the horizon as several upcoming mall openings are in the pipeline, including 118 Mall and The Exchange.

Sunway Malls’ recovery is well ahead of projections for the overall retail industry as Retail Group Malaysia expects retail growth to reach pre-pandemic levels only in 2024.

In an interview with The Edge, Sunway Malls & Theme Parks CEO H C Chan says traffic and sales have recovered strongly, adding that the malls recorded their best traffic in 22 months on Jan 1 this year. “We expect a strong January performance,” he remarks.

“A strong pent-up demand, festive seasonality, a high percentage of fully vaccinated population and de-escalating Covid-19 daily numbers were among the key drivers in aiding the recovery,” Chan points out. Traffic and sales have recovered 70% in FY2021 when compared with FY2019.

“Despite the pandemic, Sunway Malls continues to buck industry trends and outperformed the industry with a high 96% occupancy rate, up 1% since the start of the pandemic, and well ahead of the industry by 3% to 13%,” he adds.

On the whole, occupancy rates have been under pressure for the past 22 months.

Shopping complexes that come under Sunway Malls are: Pyramid, Velocity, Putra and Giza in the Klang Valley; Big Box and Citrine Hub in Iskandar, Johor; and Carnival in Seberang Perai, Penang. Pyramid, Putra and Carnival are group malls parked under Sunway Real Estate Investment Trust (Sunway REIT) and have a combined 3.1 million sq ft of NLA.

It is noteworthy that not only did brands that were already in one Sunway mall expand to another mall within the group, existing retailers also signed up for more space, signalling a healthy take-up rate.

Bucking the general trend, Sunway Malls saw robust demand for space with a total of 160 new shops opening in 2021 — albeit lower than the 200 new openings in 2020 — taking the cumulative total to 360 new shops since the pandemic started. The Klang Valley continued to experience a higher retail space take-up rate, with 91% of total new shops for the mall group (up from 2020’s 85% share).

Sunway Carnival in Penang took 5% (unchanged from 2020) and Sunway Big Box in Iskandar occupied 4% (compared with 2020’s 10% share).

Chan notes that because the group’s Klang Valley malls (Pyramid, Velocity, Putra and Giza) collectively account for the bulk of the NLA, most of the openings/demand for retail space will be seen at these malls. Pyramid and Velocity lead in terms of new shop openings at 69 and 35 respectively, followed by Putra’s 21 new shops.

What about store closures? Chan says there were substantially more new shop openings than closures for the group. “Shop closures have been insignificant as the number is in the single digit. It fell within the normal range as there are always closures every year and the attrition rate is relatively low in Sunway Malls. The continued support and trust towards the Sunway brand by retailers have been instrumental and pivotal in enabling Sunway Malls to buck the trend.”

Providing more specifics, Chan says of the 160 new shops that opened in 2021, 47% comprised retail (including fashion); 36% food and beverage; 8% beauty; 8% IT and telco; and 1% leisure and entertainment. The percentage was very similar for 2020 with just a 1% to 2% variance. This suggests that expansion continues to be predominantly driven by the retail and the F&B sub-sectors despite challenges posed by the pandemic.

As for the non-retail sub-sectors (such as F&B and leisure), Chan opines that the combined 37% take-up is indicative of a rising growth in the non-retail segments in the mall industry. “We foresee this will eventually grow to 50% of the mall’s retail space in the near future, in tandem with greater out-of-home dining and recreational pursuit.”

The 160 new shops cumulatively occupy 350,000 sq ft of NLA, and in terms of space breakdown, 63% is retail; 24% F&B; 3% beauty, 3% IT and 7% leisure and entertainment.

Chan observes that there were tenants that made their foray into one Sunway mall in 2020 and expanded to another group mall in 2021. Citing examples, he says Shabuyo, Chateraise (Japan), Nanyang Cafe, and Memorié Cafe (Malaysia) first opened in Velocity in 2020 and a year later in Pyramid. Similarly, IORA, which started in Pyramid, expanded to Velocity. “This type of expansion was more pronounced throughout 2021,” he says.

At the same time, existing tenants took up additional space as well, a prime example being Adidas Brand Centre at Sunway Pyramid, which expanded by 3,000 sq ft to 17,000 sq ft.

Meanwhile, new foreign brands expected to open at Sunway Malls include Don Don Donki and Taco Bell.

According to Chan, foreign retailers that had already planned their entry into Malaysia are delaying their launches but not cancelling plans. This is because Malaysia continues to be a strategic market for retailers that are drawn to the relatively lower cost of setting up business and ease of connectivity.

In 2021, Sunway Malls also managed to introduce highly successful street shops into its malls, particularly those in F&B. “We have seen a proliferation of these brands making the transition, including Nanyang Cafe, Day One Day One, The Owls Cafe and many more,” he notes.

“The pandemic has been the great equaliser to reset the business landscape, with all retail players on a level playing field. Retailers that proceeded with their openings are better positioned to capture the market when it rebounds. Competition is less during this period and those who build with the future in mind will be able to negotiate better terms and locations. There is a lot of strategic value that can be unlocked from all this.”

The next two retail expansions for Sunway Malls will be in Penang and Perak. On April 1, Sunway Carnival will open a new wing that will see the mall doubling its retail space to one million sq ft from 500,000 sq ft. To date, the new RM500 million wing has secured 95% occupancy and is expected to be fully occupied by the second half of 2022. As a result, visitation at this mall, which is parked under Sunway REIT, is expected to jump to 12 million annually from eight million currently.

With the additional retail space, Sunway Carnival will introduce a list of first-time stores in mainland Penang and a number of large-format stores, which include Jaya Grocer, JD Sports, Bath & Body Works, Innisfree, Laneige, Victoria’s Secret and more. The mall’s new tenant will also introduce a 13-screen GSC Cinema — the largest in the northern region.

“With double the space, the number of shops is set to increase 60% from 220 shops to 350 shops. Collectively, this exercise is expected to bring about economic and social multipliers, with an additional 1,500 new jobs created for the local community,” Chan points out.

As for Sunway Ipoh Mall, which is slated for completion in three years, it will offer 700,000 sq ft of NLA and 2,700 parking bays. “This development is designed with two things in mind — to blend with Tambun’s natural setting and introduce the best retail experience into the heart of Perak. The mall will further complement the existing development in Sunway City Ipoh with a retail component that features international brands and F&B outlets to offer all the best food Ipoh has to offer, ultimately attracting locals and out-of-towners. It is expected to be completed in 2025,” Chan explains.

On competition from new malls following the opening of Pavilion Bukit Jalil and The Mitsui Shopping Park Lalaport Bukit Bintang City Centre, he says “So far, we have not seen any significant change in traffic. The numbers are holding up.”

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