PETALING JAYA – An estimated 6.58 million sq ft of net lettable space from more than 10 malls is expected to enter the Klang Valley retail market in the second half this year, raising concerns of added pressure on occupancy levels for both existing and incoming stock.
According to Knight Frank in its Real Estate Highlights report, the recent completion of around 450,000 sq ft of net lettable retail space brings Klang Valley’s cumulative supply to 57.5 million sq ft in the first half.
“Retail space per capita, analysed at around 7 sq ft per person, is one of the highest in Malaysia. The current concern weighs more on the completed retail stock that have yet to be filled and this puts further pressure on occupancy levels going forward.
“The Klang Valley retail landscape continues to face strong headwinds and the recent completion of some 450,000 sq ft of space further heightens competition in an already crowded market,” it said.
The biggest contributor of the 6.58 million sq ft of space entering the Klang Valley market will be from Empire City Damansara Mall, totalling around 2.3 million sq ft, said Knight Frank.
This is followed by Tropicana Gardens and Central i-City Shopping Centre at one million sq ft and 940,000 sq ft of net lettable space respectively.
Knight Frank noted that Kuala Lumpur City Hall has frozen new approvals for projects, including those built on hill slopes and public spaces, to address the growing mismatch in supply and demand of selected property segments including retail.
“This measure is expected to provide a breather to the oversupplied retail market as it seeks to find its equilibrium.”
Nevertheless, the property consultancy is still optimistic about the outlook of the local retail sector for the remainder of 2018.
“Moving forward, Malaysia Retail Association has revised upwards its full-year forecast from 4.7% to 5.3%. The government’s decision to zero rate the Goods and Services Tax augured well for the retail industry and increased demand for goods and services.
“The Sales and Service Tax may spur spending with lower prices for necessity goods.”
Meanwhile, the proposed move on minimal wage will be a breather for lower income consumers and may strengthen purchasing power, Knight Frank added.
“For the remaining of 2018, retail sales growth is expected to be sustained as consumer sentiment improves with higher purchasing power. We continue to see more consumers turning to online shopping for greater choices, bargains and convenience evident from rapid growth in e-commerce.
“To remain competitive due to rising popularity of online shopping, the retail segment has been banking on securing tenants with services and experience factor such as food and beverage, beauty and dermatology and sports and entertainment.”
Separately Knight Frank said the average monthly gross rentals of selected prime shopping centres remained resilient in the first half of this year.
“In Kuala Lumpur city, Suria KLCC and Pavilion Kuala Lumpur continued to command higher average monthly rentals of RM24 per sq ft to RM26 per sq ft. These popular malls registered near full occupancy of 97% and 99% respectively.
“In the city fringe, Mid Valley Megamall and The Gardens Mall command average monthly rentals of RM17 per sq ft and RM16 per sq ft respectively. These malls registered 100% and 98% occupancies, with back-to-back tenant movements and renewals.”
The property consultancy said the average monthly rentals for Sunway Pyramid Shopping Centre and The Mines in Selangor were RM14 per sq ft and RM9 per sq ft respectively.
“These malls are 99% and 94% occupied respectively.”