KUALA LUMPUR (March 11): The oversupply of retail space in the Klang Valley has been going on for almost a decade, but is getting worse as it has become common for malls to commence operation with less than 50% occupancy.  

Most malls are also finding it a challenge to fill the space, even though shopper traffic is back to pre-pandemic levels.

The oversupply coupled with labour shortage and retailers who are still in a recovery mode post pandemic, has exacerbated the problem. Given the ample excess, tenants have become more selective when deciding to expand.

Consider this: Last year, the Klang Valley saw the opening of seven malls with 2.73 million sq ft in net lettable area (NLA). This year, another eight malls are scheduled to open, adding another 3.37 mil square feet in NLA in the Klang Valley.

With such high vacancies, why do developers keep building more malls? Are proper studies being conducted prior to deciding to build the malls? Industry experts say that things will only get worse once development and construction pick up pace.

Meanwhile, malls are said to be accepting short term leases and willing to bear the renovation costs and provide flexible terms to entice tenants.

What is the impact on rent and who is surviving? While industry players acknowledge the glut in retail malls in the country, they contend that it all boils down to specific locations and what each shopping centre has to offer.

Data from the Knight Frank Real Estate Highlights 2022 report shows that top malls in the city centre such as Suria KLCC and Pavilion Kuala Lumpur command average monthly gross rentals of up to RM33 per square feet (psf) and RM26 psf, respectively.

It is a balancing act for mall owners who have to grapple with a labour shortage and higher electricity tariffs, and yet have to regularly tweak their tenancy mix to ensure their malls remain vibrant.

Read the story in the March 13, 2023 issue of The Edge Malaysia weekly.

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