This article first appeared in The Edge Malaysia Weekly on January 31, 2022 - February 6, 2022

IF 2020 and 2021 saw a number of retailers — including long-established brands at well-located malls — forced to call it a day after the Covid-19 pandemic hit, 2022 looks set for a retail expansion and an increase in retail space take-up.

One mall operator that has managed to achieve an admirable level of occupancy and is preparing to open more stores at its shopping centre is Ikano Centres. Following the recent addition of names like Lulu Retail at its mall in Johor and BookXcess and Decathlon in Kuala Lumpur, Ikano Centres will add TMG Plus, Mr DIY and Mr Toy in Batu Kawan later this year.

“A total of 46 new tenants will join the Ikano Centres family in the first quarter of 2022, across Malaysia and Thailand. The upcoming openings will occupy about 120,000 sq ft,” Adrian Mirea, shopping centre and mixed-use director of Ikano Centres tells The Edge in an interview.

Ikano’s expansion comes even as property consultancy Rahim & Co says it is uncertain whether the market’s absorption of retail space will be able to keep up with the large injection of new supply, as the pandemic is still present. Mirea adds that another 70,000 sq ft are undergoing commercial development across Ikano Centres’ portfolio.

Ikano Centres, which owns and operates four shopping centres with a total of 3.74 million sq ft in gross leasable area (GLA) in Malaysia and one centre with 2.3 million sq ft in GLA in Thailand, is enjoying an occupancy rate north of 90% at each of its centres — a commendable feat in current times.

But what is working in its favour is probably its affiliation with IKEA, the powerful Swedish brand in the furniture and home furnishing business that is both a major tenant and crowd puller at these malls. Adding to its attraction is the work done by the mall’s management to pivot to digital and innovative concepts to help drive sales.

Ikano Centres is part of Ikano Retail which, in turn, is part of the Ikano Group. All Ikano Centres are anchored by IKEA. Ikano Group, whose businesses include banking, reinsurance and industrial services, and IKEA were established by the Kamprad family.

“Our lease rates remain strong and healthy, with IPC at 98%, Megabangna at 99.5%, MyTOWN and Toppen at 90% each and our Batu Kawan development at 98%,” Mirea points out.

Ikano Centres’ four Malaysian stores are IPC Shopping Centre in Mutiara Damansara, which opened in 2003, MyTOWN Shopping Centre in Cheras (2017), Toppen Shopping Centre in Johor (2019) and a yet-to-be-named outlet in Batu Kawan on mainland Penang (Phase 1 was completed in December 2019 and Phase 2 in November 2021). In Bangkok, Thailand, it owns the Megabangna shopping mall (2012).

IPC offers 789,000 sq ft of GLA, MyTOWN slightly twice as much at 1.5 million sq ft while Toppen offers 1.25 million sq ft. Batu Kawan currently offers 200,000 sq ft while Megabangna is huge at 2.3 million sq ft. The GLA is inclusive of the space occupied by IKEA.

On the group’s most recent addition of Batu Kawan, Mirea says, “The second phase of this development, our unique F&B drive-thru, was opened in November 2021 to give the community in Batu Kawan more dining options. We will continue to grow other phases, with the final offer comprising about 1.5 million sq ft of GLA inclusive of mixed-use components.

“Like many other players in the retail industry, footfall and sales at our centres were significantly impacted in 2020 and 2021. At the height of the movement restrictions and lockdowns, we saw a decrease in visitation by almost 80%.

“Our teams looked at other ways to continue engaging with our customers, including partnerships with GoGet to introduce personal shoppers, particularly [for] those who were reluctant to visit physical spaces.”

GoGet enables customers to make bookings for personal shoppers to help carry out their shopping at the centres. The purchased items are then delivered to pick-up points or directly to the customers’ homes.

“Digitally, our IPC and MyTOWN centres ventured into the social commerce space to organise shoppable live streams for customers to interact with and purchase from their favourite tenants. Additionally, Ikano Centres enhanced the digital platform to include F&B order services on the Toppen app,” he says, adding that loyal customers are also rewarded.

“We continue to offer rewards to our loyal members to drive visitation. At Ikano Centres, we co-create our meeting places together with IKEA to draw synergies in driving visitation to our total destinations. The size of each IKEA store differs from location to location, and we work closely to encourage cross-visitation between our centres and IKEA stores.”

On whether it sees itself as a retailer or a mall operator first, Mirea says, “We see ourselves as retailers and therefore are able to understand the challenges that our partners go through. We will continue to work closely with them in the coming year to ensure that recovery is achieved better, together”.

Furthermore, Ikano Centres has run campaigns on both GrabFood and foodpanda to drive support for its F&B tenants. With this, some centres received an increase in sales of about 15% a month during the Movement Control Order period.

The overall result of the initiative taken, coupled with higher vaccination rates, has led to patronage at the mall picking up at a faster pace. “We are optimistic that our visitors will return to us,” Mirea says.

On Dec 31, Ingka Group, whose core business is IKEA Retail, said it would be raising the price of its products globally by an average of 9% this year, owing to the ongoing global supply chain disruption.

On the impact of this move on its malls, Ikano Centres commercial director Arnoud Bakker says, “Supply chains all over the world have inevitably been impacted by the ongoing restrictions, resulting in increased pricing across the industry. The focus for our shopping centres remains clear, which is to ensure that we design our offers to continuously provide value for money and great deals that cater for the many wallet sizes of our customers.

“We ensure that this is reflected in our tenant mix, to always bring about new offers that will fit the customer profiles of our respective catchment areas.”

Examples that Bakker cites are the introduction of Lulu Group’s grocery business at Toppen and Tunas Manja Group, which will open a TMG Plus in Batu Kawan that occupies 25,000 sq ft.

“Other recent openings to ensure that we provide great value for our customers include the new additions to MyTOWN such as SSF Flagship, BookXcess, Max Fashion and Decathlon,” he adds.

On the issue of growing competition due to recent new mall openings and upcoming openings, Bakker says, ”At Ikano Centres, we have never stopped trying to improve our meeting places with constant concept enhancements, customer flow improvements and redevelopment of spaces to facilitate new and relevant offers. The key to ensuring we remain competitive is to make sure that our offers continue to be updated and be relevant to the needs of various customer bases, as we continue our investments in research, planning and multiple commercial developments.”

At Batu Kawan, Ikano Centres introduced a unique F&B drive-thru to meet the growing needs of residents and those working in the area. The McDonald’s drive-thru opened in November 2021. Plans are afoot to welcome other drive-thru retailers, including KFC, Tealive, Coffee Bean & Tea Leaf, as well as a petrol kiosk in the coming year.

“We will soon be announcing the next phase of the Batu Kawan development, scheduled to start in April. This new phase will be anchored by TMG Plus, Mr DIY and Mr Toy to provide the growing township with more choices of daily essentials. We are fortunate that our Batu Kawan development is in a strategic location to leverage an immediately growing township, with easy access to visitors from the rest of North Malaysia,” Bakker says.

Toppen will also enjoy enhancements as the brand’s family-oriented facilities and dining experiences will be strengthened. Some 50,000 sq ft of additional retail space, including a lifestyle rooftop, is scheduled to open in 4Q2022.

“We believe in co-creating unique concepts with our tenants to remain competitive. Our leasing goes beyond just leasing the spaces, but to put greater emphasis on forming strategic new partnerships online and offline, with the integration of various operating models,” Bakker says.

What’s next for Ikano Centres? Mirea opines that an omnichannel retail approach is the way forward.

“Over the past 24 months, Ikano Centres has invested in digital innovations aimed at strengthening the customer experience, supporting our tenants while giving visitors multiple ways to engage with their favourite centres. We will continue to invest in channels that can seamlessly connect online to offline, as we see digitalisation playing a key role in enhancing the experience that customers have with us today,” he adds.

“As a family-oriented retailer, Ikano Centres believes that co-creating with our communities is key. One platform it has created is Soulmates, which is described as an affordable space for small businesses to connect with their customers.

“Ikano Centres aims to go beyond being just a shopping centre, to create meeting places where families and friends can come together to connect, be inspired, learn and enjoy new experiences all under one roof. We aim to build community hubs to ensure that our shopping centres are equipped with features that will elevate the consumer’s experience further — both physically and emotionally — ensuring that there is always something for everyone to see and do.”

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