This article first appeared in The Edge Malaysia Weekly on September 11, 2023 - September 17, 2023

THE owners of the 25-year-old Suria KLCC mall in Kuala Lumpur do not appear overly concerned about the upcoming mall openings and the addition of sizable retail space in the capital. Neither are they worried about the global economic uncertainty.

This confidence stems from the mall having experienced and survived the addition of several million sq ft of retail competition in the capital since it opened its doors for business in 1998.

Scheduled upmarket shopping centre openings include The Exchange Mall@TRX and Pavilion Damansara Heights Phase 1, which will add 1.83 million sq ft of retail space in the fourth quarter of 2023, and the opening of Warisan Merdeka Mall@118 and Pavilion Damansara Heights Phase 2, which will add 1.43 million sq ft of retail space next year. Typically, new malls intensify competition as they become magnets to consumers.

“The Klang Valley has seen a massive amount of retail space added over the last 20 years, yet we still outperform our competitors — some of which, in gross terms, have about 50% more of NLA (net lettable area) — when we benchmark against their available results. We have seen a global financial crisis and a pandemic, yet we have emerged stronger and even more customer-focused,” Suria KLCC Sdn Bhd executive director and CEO Andrew Brien tells The Edge. Simply put, while Suria KLCC has a smaller NLA than its competitors, its sales densities are higher, translating into a higher bottom line.

Suria KLCC Mall is owned and managed by Suria KLCC Sdn Bhd, which is owned by KLCC Property Holdings Bhd (KLCCP, 60%) and CBRE Global Investors Inc (40%).

“Our deep understanding of our customers, built from extensive research over the life of Suria KLCC and working closely with our retail partners, has enabled us to make data-driven decisions that enhance our customer experience, and our shareholder returns,” Brien says.

He allayed any fears about a potential impact on consumer demand and retail spending with trouble brewing in China and the uncertain economic outlook, stressing, “We have been through a global financial crisis and a pandemic, we have a strong management team with the vision and skill to navigate whatever may be on the horizon.”

Brien expects a positive outlook for Suria KLCC — located in the podium of the iconic Petronas Twin Towers — for the remainder of the year. He says that although Suria KLCC has yet to achieve pre-pandemic footfall levels, it should be able to do so towards the end of next year. In 2019, prior to the pandemic, the mall’s footfall was more than 45 million per year. “At present, while we have made substantial strides towards recovery, it is important to note that we have not fully regained the pre-pandemic level. Our current footfall stands at about 95% of the pre-pandemic benchmark.”

Some 15% of the total footfall is now made up of international tourists, compared with 20% before the pandemic. “As more leisure travel occurs in Malaysia, we see our share rising as we are the country’s iconic experiential destination,” Brien says.

He describes the footfall recovery as solid and attributes the performance to Malaysian consumers, who make up the rest of footfall and on whom its business is based.

While he was unable to share any specifics on when revenue and profit will return to pre-pandemic levels, Brien says, “ It is sufficient to say we are definitely getting close.”

A search on the Companies Commission of Malaysia website shows that in the financial year ended Dec 31, 2022 (FY2022), Suria KLCC Sdn Bhd posted a net profit of RM334.88 million on revenue of RM456.02 million. It had total liabilities of RM790.86 million while total assets stood at RM5.78 billion. It also had an accumulated profit of RM333.22 million.

It is worth noting that prior to the pandemic, in FY2019, the mall achieved a net profit of RM388.38 million on revenue of RM480.83 million.

While Suria KLCC manages Mesra Mall in Kemaman, Terengganu, and Alamanda Shopping Centre in Putrajaya, the figures only represent those of Suria KLCC mall. Suria KLCC, Alamanda and Mesra Mall are distinct and separate entities with their own management and ownership.

The contribution from the mall is via management fees and has minimal effect on the overall performance of Suria KLCC.

Meanwhile, in the first six months ended June 30, 2023, KLCC Stapled Group — which comprises KLCCP and KLCC Real Estate Investment Trust (KLCC REIT), whose retail segment is represented by Suria KLCC and Menara 3 Petronas — reported a profit before tax of RM117.2 million and revenue of RM258.3 million. KLCC REIT, which has Petronas Twin Towers, Menara ExxonMobil and Menara 3 Petronas,  including the retail podium, in its portfolio, is listed on Bursa Malaysia.

When Suria KLCC first opened in 1998, it had a NLA just shy of one million sq ft. Since then, the mall has expanded its concourse area to facilitate the underground link to the KL Convention Centre, added the speciality retail space at the base of Petronas Menara 3, reconfigured the Isetan Department Store, redeveloped the former Parkson’s space into premium speciality retail and expanded its Signature Food offering.

“This now sees the entire Suria (KLCC) offering, owned by both our joint-venture and KLCC REIT, tipping the space scale at just over 1.1 million sq ft,” Brien says.

The mall currently enjoys 96% occupancy. Citing a Henry Butcher Malaysia report from January, which showed the 3Q2022 average occupancy at 75.2%, Brien says Suria KLCC is “well above the Klang Valley average, and we are targeting to increase this in the last quarter of the year”.

Suria KLCC has so far this year welcomed 20 new tenants. “In the first half of the year, we introduced 20 new tenancies and with the rise in occupancy, we will no doubt add more new tenants in the remainder of the year,” Brien says.

On tenancy renewals, he says, “Our weighted average lease expiry (WALE) is 4.9. This indicates a good spread of expiries each year, given the nature of speciality tenancies, enabling us to offer market-appropriate terms to our retail.”

He explains that a high WALE indicates that a property has a stable income stream as tenants are committed to long-term leases. The 4.9 number is derived by taking the total length of all leases in a property portfolio and dividing it by the number of leases. It does not mean a tenant stays for 4.9 years but it means that this is the average length of the tenancy.

Rental rates at Suria KLCC have also improved. “Taking into account the year-to-date performance to June 2023, there has been a growth in rental rates at Suria KLCC. This has been positive, as globally, retail rents have been flat or negative. This rise in rental rates underscores the evolving dynamics within the retail and commercial landscape, where Suria KLCC has remained responsive to changing market conditions and has effectively capitalised on its strategic positioning and offerings,” Brien says.

Meanwhile, there are plans for an upgrade of the mall. “In terms of the overall asset, our joint-venture owners are focused on maintaining a world-class iconic experience. This has seen the complete refurbishment of all our escalators over the last two years and we will undertake another renovation of our restrooms next year.”

Tenant Isetan is undertaking a complete refurbishment of its department store over the next 24 months while TGV will commence a complete refurbishment of its cine­mas in the coming months.

Suria KLCC also manages Alamanda Shopping Centre and Mesra Mall on behalf of parties related to KLCCP.

Putrajaya Holdings Sdn Bhd, the owner of Alamanda, is investing RM100 million in upgrading the 19-year-old mall and enhancing the visitor experience. This transformation, which will see total NLA increase to over 800,000 sq ft from 663,763 sq ft will help boost the mall’s footfall.

The construction and redevelopment of Alamanda, which began on June 30 is expected to be completed in the fourth quarter of 2024. Brien says the mall is expected to see a double-digit increase in visitors from the current 12 million per year once the project is completed.

On performance, Brien points out that Alamanda managed to maintain its profitability during the pandemic. But due to strategic tenancy considerations in preparation for the redevelopment its FY2023 performance has not matched the 2019 level yet. “Our aim is to surpass 2019 metrics by 2025, coinciding with the project’s completion in 2024.”

A major enhancement and highlight at the mall will be the inclusion of an adventure park following a tie-up with Singapore-listed theme park developer Sim Leisure Group Ltd. This outdoor attraction, Brien says, will provide a blend of adventure and nature.

Other enhancements at Alamanda include the addition of family-friendly cinema halls, an outdoor plaza, an expansion of its bowling area and increasing the variety of food and beverage (F&B) options. “Our focus is on enriching the overall visitor experience. We are expanding our entertainment offerings with modern cinema halls and an expansive bowling area.”

The revised tenant mix will encompass about 42% entertainment and F&B, 29% fashion and accessories and 29% department stores, supermarkets and general retail.

“We are meticulously enhancing both the exterior and interior aesthetics. Externally, a lush lawn bordered by seating spaces will create an inviting outdoor space. Internally, marble flooring, glass balustrades and stainless-steel handrails will contribute to a sophisticated atmosphere, offering a modern and streamlined feel,” Brien says.

On Mesra Mall, which is owned by KLCC (Holdings) Bhd, Brien says its current occupancy rate is 95%, with footfall rising to almost pre-pandemic levels while sales have now exceeded pre-pandemic levels by over 14%. 

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