Proper planning and management the key

WITH more shopping malls heading their way into 2024, it’s hardly surprising that we are witnessing a glut in the sector.

As of the fourth quarter of 2023, Malaysia boasted 1,074 shopping malls with a combined retail space of 17.69 million sq m, with the Klang Valley contributing roughly 200 shopping malls and offering a retail space of 6.5 million sq m.

Amidst the already saturated market, another 33 shopping malls with a space of 1.13 million sq m in incoming supply and 10 complexes with nearly 0.35 million sq m in planned supply are expected.

This begs the age-old question of whether the performance of shopping malls will be impacted in the years to come, or will they cease to exist altogether.

Starbizweek caught up with four experts within the industry to capture their thoughts on the likelihood of shopping mall cannibalisation occurring outside of the Klang Valley.

Savills Malaysia group managing director Datuk Paul Khong believes this issue is unlikely to only take place in the Klang Valley. In fact, shopping malls in other states have an equal possibility of failing if not properly planned and managed.

Khong states that be it within the Klang Valley or out of state, mall operators can “make it work” if the actual demand for malls exists.

Knight Frank Malaysia executive director of research and consultancy Amy Wong Siew Fong also shares the view that unsuccessful retail malls are not exclusive to a particular region, but are prevalent in both the Klang Valley and throughout Malaysia.

However, Wong highlights that the cannibalisation issue is more significantly felt in the Klang Valley due to the high concentration of retail malls there.

Sunway Malls & Theme Parks chief executive officer H C Chan sees this issue more in correlation with demand and supply, and that there are certain areas that are over-served and under-served, leading to imbalances and duplicity.

Given its larger retail space footprint and over-served areas in the Klang Valley, Chan says it is unsurprising that the frequency is higher. Yet, he acknowledges that other markets also experience a similar phenomenon.

Malaysia Shopping Malls Association adviser and former president Tan Sri Teo Chiang Kok, meanwhile, is of the opinion that the shopping mall space is unlikely to be saturated. However, he admits that in certain locations, it may be crowded.

On another note, Teo says malls in major cities as well as in suburbs and smaller cities are designed and positioned differently, catering to their own niche market.

Below are excerpts of the interview:

Starbizweek: Why do you think the cannibalisation of shopping malls occurs?

Khong: The oversupply in certain markets and areas lead to increased competition and the cannibalisation phenomenon that leaves many malls struggling to survive.

With the recent escalating operational cost, ranging from rentals to utilities as well as labour, the profit margins of mall operators and retailers are now being squeezed.

Malls with a low and declining occupancy rate may be facing a challenge in filling up their vacancies. Such a situation may eventually cause a deterioration in their operations and maintenance, affecting their viability as it becomes worse.

Be it in the Klang Valley or out of state, similar issues are actually being faced by mall operators nationwide, leading to the “death” of these shopping malls if they fail to mitigate.

Wong: The lack of understanding of the current retail landscape, particularly when it comes to the specific location and demographic profile of the catchment area.

Aside from that, the absence of proper retail planning and design development also contributes to the cannibalisation of these new malls.

Developers should not assume that the same formula that succeeded in another mall can be applied to their mall as well. Catchment analysis is equally as important, as is the long-term vision for the success of the mall.

Has the Klang Valley, being the centre of Malaysia, affected shopping malls outside its borders?

Khong: Out of the Klang Valley, shopping malls such as Melaka Parade, Kulim Sentral, East Coast Mall, Sunway Carnival and Queensbay Mall are actually booming and attracting good crowds.

In fact, many of them have recorded a footfall of more than 80% to 100%, or even more than the pre-pandemic levels, and have been performing well in the past 24 months from April 2022.

Malls that fail to perform can be attributable to the wrong target segments and retail concept, a poor tenant mix, secondary location with poor access and visibility, stiff neighbouring market competition and wrong design and layout for the mall itself.

It is also crucial to consider demographics, as it is essential for shopping malls to be developed near good demographics and existing target catchments.

Wong: While it is true that the Klang Valley attracts young people due to the wide range of job opportunities in the capital city, there still exist many large and thriving communities outside out it.

In reality, many neighbourhood malls in other cities and towns within Malaysia continue to attract good shopper traffic, as they serve the needs of local communities.

Chan: Malls outside the Klang Valley have always served the role of neighbourhood malls catering to locals, and in some instances, driving traffic from neighbouring districts and states.

What should malls do to stay relevant?

Chan: With competition getting more intense, asset-enhancement initiatives of redeveloping lower-yield retail space into higher-yield retail space with attractive retail formats needs to be embarked on to keep the malls relevant.

It is important that malls keep re-inventing themselves to stay relevant, as any margin of error and non-relevancy is costly.

In many ways, the mall industry is a barometer of the country’s economic well-being. Certainly, an area with a more endowed and developed economy will see more communities flourishing, and in turn, encourage consumer spending.

Teo: Success and failure is part and parcel of business and entrepreneurship.

While property developers and entrepreneurs are certainly optimistic in considering getting into the business of shopping malls, they have to employ experienced managers to run the malls as shopping mall management involves a whole gamut of skills.

The success of a shopping mall largely depends on the location and accessibility, practical layouts, tenant mix and services serving their catchment market, and all these factors must be well balanced for the mall to succeed.