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Shopping Malls: The Battle For Survival

Uncertainties in the global fiscal, economic and geopolitical policies plus the effects of the shrinking ringgit and weakened consumer sentiments continue to flood the local market with some degree of concern.

Adding to the catch-22 situation is what is touted to be a large flow of incoming retail space that is anticipated to lead to an unbalanced glut situation. Meanwhile, shopping malls mushrooming throughout the nation are not showing signs of a slowdown either.

“Currently in Kuala Lumpur and Selangor, only 57.5 million sq ft is occupied over the total 67.1 million sq ft of retail space. There are about 4 million sq ft vacant in KL and 5.6 million sq ft vacant in Selangor,” says Sr. Sulaiman Saheh, Director of Research, Rahim & Co International Sdn Bhd.

He observes that with more and more retail malls being launched and coming into completion to the tune of an estimated 8 to 9 million sq ft, there is a concern of oversupply, especially in relation to current passive consumers and deteriorating consumer sentiment.

Yet, these anticipated growing numbers of retail space do not seem to be halting any time soon.

Richard Chan, Past President of the Malaysian Association for Shopping and High-Rise Complex Management says that despite so much negativity going around, with speculations being rife that many malls are going to close down, the opening of more malls need not be viewed entirely negatively.

“The numbers don’t matter as it is about how you plan your mall.

“You need to know your market as well as plan, position and manage it well,” he opines saying this is even more pertinent now, given the challenging times.

Chan shares that even during uncertain times, when managed well and backed by the right products, certain malls are able to hold their own including fetching rental rates above other malls.

He cites the example of Bangsar Shopping Centre in KL which is recording robust sales, given the suburban and upmarket neighbourhood mall’s profile targeting expatriates.

He says the presence of strategically planned malls can do much to increase the capital appreciation of properties in the neighbourhood although this situation is very difficult to predict now given the downturn. Previous examples point to an increase by some 15% to 20% after some given years.

According to Chan, as more and more malls open nationwide, in order for them to survive and thrive, they need to differentiate themselves by catering to the unique needs of different locales.

Even huge megamalls such as Mid Valley Megamall in KL has undergone renovation and refurbishment with it expanding and opening another new mall in Mid Valley Megamall, Southkey in Johor to remain relevant and versatile while seeking new market share.

“In terms of expansion, we estimate that Mid Valley Megamall in KL with 1.7 million sq ft of net lettable area (NLA) expanded by way of The Gardens with an additional 800,000 sq ft of NLA combined, adding up to 2.5 million sq ft in NLA,” says Chan.

The unconventional wisdom of this approach has been adopted by big players in the market including Mid Valley Megamall in KL whose DNA is being replicated in the upcoming Mid Valley Megamall, Southkey in Johor.

Just late last year, IGB Corporation Berhad and Southkey City Sdn Bhd announced that its joint venture company Southkey Megamall Sdn Bhd would be developing Mid Valley Megamall, Southkey.

Located near Johor’s city centre, the shopping mall will comprise six levels of retail, two levels of basement car park and eight levels of elevated car parks.

IGB Corp Bhd Group Managing Director Datuk Seri Robert Tan Chung Meng in a previous sharing  states that the mall with a NLA spanning 1.5 milion sq ft will emulate its KL counterpart. It will for one, bank on the office and hotel crowds for the off-peak shopping season. It is anticipated to open by end of 2018.

The mall, approximately 85% the size of Mid Valley Megamall in Kuala Lumpur occupying 14.5 ha, will be the largest in Johor. It is part of the larger RM6 million integrated mixed-use development by Mid Valley Megamall, Southkey in Johor comprising three hotels, four office towers and one serviced apartment.

Once completed, Mid Valley Megamall, Southkey will have 400 retailers including anchor tenants besides 6,000 car park bays.

Within a 3km radius, the population catchment is said to be about 750,000. However, by factoring in Singapore within an increased radius of below 10km, just 1% the Lion City’s catchment population alone out of roughly five million would make up 50,000 shoppers daily. This would be sufficient to attract almost 80% of the footfall of its Kuala Lumpur mall.

Despite an increasingly competitive retail landscape, both malls – Mid Valley Megamall in KL and The Gardens Shopping Mall in Johor have consistent occupancy rates at 100% – even during challenging times. In fact, the tenant sales in 2015 improved at an average of 8% year-on-year as compared with 1% for other malls.

Another megamall expanding is portfolio is Pavilion KL with its upcoming malls in Bukit Jalil and Damansara Heights sporting the “Pavilion” brand name that will be tailored to suit the catchment, consumer behaviour and preferences of the respective areas.

“Pavilion’s 1.26 million sq ft of NLA in 2007 was further boosted by the further expansion represented by Pavilion Elite in 2016 by some 250,000 sq ft.

“Meanwhile, Sunway Pyramid’s 1.6 million sq ft of NLA in 2015 has seen tremendous expansion to 1.7 million sq ft currently and 2 million sq ft NLA upon completion of Phase 4,” says Chan.

He adds that Suria KLCC also has expanded its 1 million sq ft of NLA to 1.2 million sq ft while 1 Utama Shopping Centre with 680,000 sq ft in 1995 has increased to 2 million NLA.

Pavilion Damansara Heights which is scheduled to open in the first quarter of 2020 will resemble the successful Pavilion KL which opened in 2008 with its “neutral, timeless, stone and glass” approach for retailers to showcase their products. Meanwhile, Pavilion Bukit Jalil which is scheduled to open in the third quarter of 2019 will be positioned as a regional shopping hub complete with a Spanish staircase, similar to Pavilion KL.

Malton Berhad’s The Park 2 Pavilion Bukit Jalil launch recently saw Paviion KL CEO of Retail Dato’ Joyce Yap expound on the holistic experience in edutainment and retailtainment for its Bukit Jalil mall.

“This move will ultimately set Bukit Jalil apart as one of the country’s major retail and tourist destinations. With its NLA of approximately 1.8 million sq ft, Pavilion Bukit Jalil is poised to be a regional mall in terms of brands mix, flagship stores and concept.

“Our experienced retail management team from the award-winning Pavilion KL will replicate the shopping mall’s success here. Designed by the KL Pavilion Design Studio, the regional mall façade which stretches up to 560 metres will maximise  visibility of retailers’ brands,” she says.

According to Yap, the mall has already received huge interests with over 900 registrations from prospective tenants.

“We’re confident that the development has the key elements to elevate the Bukit Jalil neighbourhood into an epicentre of style and living,” she shares at the recent launch of The Park 2 in Bukit Jalil.

The Park 2 is the last freehold residential component that offers residents exclusive access to Pavilion Bukit Jalil via a dedicated covered link bridge besides connecting them to the 80-acre Bukit Jalil recreational park.

Malaysian Minister of Federal Territories Datuk Seri Utama Tengku Adnan Tengku Mansor who was the guest of honour at the launch opines, “Once completed by 2020, the regional Pavilion Bukit Jalil shopping mall and offices will provide thousands of new employment opportunities whereby Bukit Jalil’s population and employment are projected to increase by approximately 24.2% and 51.6% to 464,300 and 273,121 respectively from 2000.

“Residents of Bukit Jalil City will be the ones who will benefit the most. Those living nearby will benefit from an increase in the value of their property. For a project of this scale and vision, Bukit Jalil City will serve as a catalyst for Bukit Jalil’s rejuvenation, raising the city’s stature with further economic growth, job creation and improved infrastructure.

“This creates demand for quality infrastructure and amenities that mirrors a world-class city. Hence, projects such as Bukit Jalil City by Malton Berhad and the Pavilion Group is another positive step forward for Kuala Lumpur. I believe we are on the right track towards advancing Kuala Lumpur as a World Class City and the region’s premier hub for business, leisure and living,” he says adding that this supports the Government’s vision to position Kuala Lumpur as amongst the Top 20 most liveable cities by 2020.

OPENING OF NICHE NEIGHBOURHOOD MALLS

The Starling mall with a gross development value of RM600 million was also added to Damansara Uptown’s neighbourhood in Petaling Jaya, Selangor catering to a residential population of over 100,000 here including that of the surrounding townships.

Despite the downturn, The Starling mall, having already achieved over 85% occupancy and targeting 100% occupancy by year’s end, shows its resilience in catering to the neighbourhood.

Chan opines that although the market is shrouded with claims of an impending glut situation, neighbourhood malls such as The Starling mall is relevant and can thrive because it meets the needs of the surrounding neighbourhood.

According to See Hoy Chan CEO Joe Tan, the surrounding captive daily catchment population is estimated at about 20,000 and a conservative 8,000 visitors daily which augurs well for the recently opened mall.

On the other side of the trajectory, KL Gateway Mall, located fronting the Federal Highway also made its debut, redefining the retail concept and livening up Kerinchi in March this year.

To date, its is the only shopping centre with a direct light rail transit (LRT) link outside KL’s central business district (CDB).

Positioned as a modern and urbanite mall, KL Gateway Mall serves a captive catchment population of approximately 400,000 within 5km of its premises while also serving over 350,000 shoppers monthly who commute using the LRT.

The covered air-conditioned 100-meter link bridge linking the LRT station and the mall is anticipated to attract 40 per cent of the mall’s targeted footfall of over 10 million a year.

The centerpiece of KL Gateway Mall is its iconic Central Piazza. A large diamond-inspired canopy made of Ethylene tetrafluoroethylene (ETFE). This fluorine-based plastic is the same material used at the Water Cube swimming arena for the Beijing Olympics covers the Central Piazza.

This results in natural daylight being ushered into a one-of-a-kind indoor space that represents a perfect interactive space for the community.

The Central Piazza also boasts a 10,000 square feet multi-level outdoor garden called The Park.

As a whole, it is an ideal place to bring the community together via events and activities taking place here. The mall boasts over 300,000 sq ft of retail space.

In addition, an automated car park representing Malaysia’s very first and the largest in Southeast Asia at 1,238 bays will provide value to shoppers.

Currently   into its final stages of completion, the advanced car park system will soon be opened, complemented by 900 traditional parking bays.

ADAPTING TO STAY RELEVANT

Citing another example in Atria Shopping Gallery, Damansara Jaya in Selangor that was reopened in 2015, Chan says this neighbourhood mall which is surrounded by a residential enclave underwent several rounds of transformation before arriving at its present stage.

To a certain degree he maintains that there is wisdom in designing neighbourhood malls which depend on the surrounding smaller primary catchment area.

Chan adds that they should be designed according to the size of the surrounding population count while taking into account average household incomes and spending patterns.  

More than a few malls have undergone facelifts due to lifestyle changes and keeping up with the trends. Examples include the stratified Summit USJ in Subang Jaya having undertaken its maiden refurbishment exercise costing RM70.48 million.

The contractor began work on the refurbishment in June 2014 and the mall was subsequently relaunched in Dec 2016. When the mall first opened in 1999, it had 1.23 million sq ft of built-up area.

Today, its gross built-up area spans 1.26 million sq ft with the transformation encompassing the building’s interior. Its external façade is covered in glass and in total, nine new escalators were installed.

Meanwhile, Sunway Putra Mall Kuala Lumpur was bought over and completely transformed in line with a major refurbishment exercise by Sunway Malls.

Out of the entire exercise cost of about RM1 billion spent to buy over and completely transform the mall, approximately RM500 million was spent on refurbishment while the other half invested in buying what was then known as The Mall Kuala Lumpur.

Transforming Sunway Putra Mall from a grand dame to an urban chic mall saw it being closed for two years for this refurbishment exercise.

The transformation reflects Sunway’s branding which surfaces in its other malls namely Sunway Carnival, Sunway Giza and Sunway Velocity.

Chan says more than a few malls have taken the cue by undertaking renovation, refurbishment and expansion exercises which have resulted in facelifts and expanded larger gross floor area (GFA) and NLA. Other rebranding exercises he says can be seen in the examples of KL Plaza to Fahrenheit 88 and Plaza UE3 to Viva Home in Cheras, KL.

TRENDS MOVING FORWARD

As much as physical malls are mushrooming all across the nation, they will also be hit by the growth of E-commerce which would influence the need to visit a retail mall.

“Generally speaking, if anybody is going to build malls today, they have to think about a one-stop area for people to congregate based on activities and not solely on retail. A few shopping centres in Singapore like Capital Mall or Fraser’s Centrepoint – the two biggest players in Singapore, are not called shopping centres or retail malls anymore,” says Colin Tan, CEO of ColinTan Training International Pte Ltd, a sales and marketing consultancy firm for developers.

“The trend is moving towards lifestyle malls where people or lifestyle hubs congregate. They are no longer known as shopping centres or retail malls because offline retail is dying in the face of online competition from E-commerce,” he says.

In fact, according to him, the more developed the country, the greater shopping malls are at risk.

“Countries like Singapore, UK and  US have already built up a high level of confidence in doing online transactions. However, in developing countries where people are not as confident of online transactions, malls there can still survive but it is only a matter of time before they gravitate towards online shopping.”

Likening people in developing countries to having a crystal ball to see what is happening in developed countries, he says based on this, consumer behaviour will change.

“I dare say Malaysians have a slightly lower level of confidence in online transactions than Singapore. That is the advantage for malls now.

“However eventually, Malaysians will get more confident with online transactions. And when they do, they may not go to the malls to buy as frequently and this will affect shopping malls.”

Therefore, he says Malaysia’s malls operator should start to adapt to this evolving trend now.

Moving forward, Tan says that malls have to be geared for what people cannot get online such as spa services, the arts, fitness and wellness, food and beverage (F&B), entertainment centres, education or the complete movie experience.

The trend in Singapore now he says is to buy online so that one is able to save on petrol while avoiding the hassle of getting in queue to get into car parks or having to pay for items at pay counters.

“The new anchor tenant of the future will not be departmental stores or grocers – but will be the activity-driven tenants” says Tan.

He opines that shopping mall designs are crucial so gone are the days where developers can build a conventional shopping centre and expect people to walk in. Citing Pavilion at Bukit Bintang in KL as an attractive example, he says its design facilitates pedestrian walkways to flow seamlessly into the “very open entrances” that lead to the “courtyard-like” centre of the mall which makes for a welcoming environment. Such designs could comprise on NLA but would eventually command higher rents to usher in greaterrsuccess for the mall.

“Malls can thrive, but they have to change their game plan,” he concludes.

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