Too many malls, or a dying breed?
It’s a story with a recurring theme: Sarawak’s commercial property is set to stay challenging as transaction rates fall and occupancy rates plunge in most shopping malls.
Unconvinced? Try walking into one of the many malls in Kuching. Chances are, you will come across empty shoplots or pulled-down shutters with signs soliciting available rental of space.
According to a property bulletin by real estate agency WTWY Real Estate Sdn Bhd (WTWY), the retail market for Sarawak in 2016 has been rather stagnant throughout the state.
In Kuching alone, only the completion of a few smaller retail developments were seen, mostly in the form of hypermarkets such as Giant at Petra Jaya, Matang Mall; Mydin at Vista Tunku and Mydin Samariang.
Another three malls are currently underway, namely Aeon at Central Park, Emporium at Tun Jugah and Moyan Square at Matang, which are expected to be completed within the next two years.
With this oversupply coming to play, WTWY observed that transaction rates in Kuching have fallen and occupancy rates for malls within the city had plunged to an average of 70 per cent for most shopping malls.
Optimistic of Bintulu and Miri
In other domestic markets like Sibu, no retail projects were even launched at all in 2016 as transaction activity stayed limited and occupancy rates for existing retails were maintained.
In Bintulu, the situation got worst as WTWY reported that average rates for Bintulu malls was at an all-time low at around 67 per cent. Malls located in the CBD, however, enjoyed higher rental rates and occupancies.
Despite the uninspiring retail outlook in Bintulu and slowing market sentiment, retail development efforts held steadfast with the completion of two new malls, Times Square Mall and Commerce Square Mall in 2016, with two more upcoming malls, Paragon Street Mall and Crown Pacific Mall, slated for completion soon.
Due to this, WTWY anticipates that the sector in Bintulu will become highly competitive and occupancies rates are expect to slow down even more.
Only Miri’s retail market remained rather optimistic, posting average occupancy rates of 83 per cent in shopping malls with malls in the CBD area enjoying a higher rate as compared to those located in the suburbs.
Newer shopping malls like the Permaisuri Imperial City Mall in particular have experienced great take up rates reported the agency.
“However, for the coming year, it is anticipated that the sector will be subdued as the overall market slows down.”
The real estate agency explained that this was partly due to a steady increase of retail supply for the past five years with one new mall being completed and launched almost every consecutive year.
How much is too much?
Just looking at the statistics provided by WTWY, it is clear that our retail development is far outpacing our actual needs in terms of malls as average rental rates across most major regions within the state have taken a dip in 2016 compared to the previous year.
“The average rental rates have dropped for the retail sector as a whole, especially for the older malls struggling to maintain their occupancy.
“For Kuching, average rental rates are subdued at around RM7 to RM8 per square foot (psf) with better performing malls offering at most around twice that rate.
“This is much less than the rate of RM20 psf that we enjoyed during the peak of retail property in previous years,” the bulletin commented. The harsh truth prevails: This is not just affecting local malls all around the state. Newly built commercial shop office units lots are also left empty as owners struggle to find prospective tenants.
It’s a head scratching sight to see some of these shop lots empty for months on ends despite being strategically placed right smack bang in the CBD area, near to schools, hospitals or residential areas.
So why exactly is this happening? There seems to be plethora of reasons ranging from poor economic climates to changing market sentiments. However, a common consensus highlighted by retail analysts and industry heads is that we are oversaturating the retail market. While more developments are to be expected in any state, with a population of only 2.636 million people, perhaps Sarawak is cutting it a bit too close with all these malls. Allen Sim, director of Coramax Sdn Bhd, VivaCity Megamall’s management believes this to be true and forewarns of an oversaturated market if nothing is changed. “There are already quite a number of malls within the state and retail density is starting to reach its peak and at the current rate malls are growing, it is not going to be easy for the retail industry. “You just can’t build that many malls; the market just can’t take it.” Sim explained to BizHive Weekly that this fast pace of development is due to an overestimation of the population growth in Sarawak. “The population is just not growing as we had anticipated as many the younger generation who have gone overseas
There is certainly an oversupply or malls currently, especially in the Klang Valley but the situation in Sarawak in my opinion is still manageable. Ronald Ling, tHe Spring management, PE Land Sdn Bhd
for studies are not willing to come back. This includes families who have chosen to migrate to other countries in hopes of greener pastures.
“Factoring in this increased migration and urban migration, I think Sarawak’s population growth in general is only around two per cent, not nearly as high as we need it to be to accommodate for our retail growth.”
Chiming in on the discussion is general manager of tHe Spring’s management, PE Land Sdn Bhd, Ronald Ling who agreed that there was definitely a current oversupply of retail space but not necessarily in State yet.
“There is certainly an oversupply or malls currently, especially in the Klang Valley but the situation in Sarawak in my opinion is still manageable.
“It is important to note that not all sectors in the retail market are doing badly. Food and Beverage (F&B) and supermarkets/hypermarkets are still doing quite well and maintaining their sales.
“Because even in a down-market, consumers still need their daily necessities and weekly ‘splurges’ – which is usually in the form of dining. Humans are sociable creatures after all.”
While there is va- lidity in both arguments, perhaps Ling is onto something as our state’s current supply of retail space still stands at a fairly moderate 6.94 million square feet (sqf) with a projection to reach almost 8.0 million sqf by 2018.
The numbers might seem rather high but in truth, it only translates to a 2.6 sqf of retail space per person within the state.
To put that figure in perspective, data derived from the International Council of Shopping Centres (ICSC); reported that the worlds’ densest retail markets are the US with an average of 23.5 sqf of retail space per person, followed by 16.4 sqf in Canada and 11.1 sqf in Australia.
In comparison, our measly 2.63 sqf retail space per capita seem fairly tame even when compared to our regional neighbours like Indonesia, Thailand and Singapore.
Going by figures alone, it’s pretty clear that we are nowhere near the retail density of many other developed and developing retail markets out there. Yet, why is it that on a whole, most retail markets globally are complaining of signs of a retail slump
just like we are?