Kuala Lumpur retail supply to increase by over 1.2m sq ft in 2026

Vacancy is likely to grow as new supply enters the market.

Retail market activity in Kuala Lumpur is expected to gain momentum despite weakened consumer sentiment according to a JLL report, supported by resilient employment growth, targeted government assistance and the upcoming Visit Malaysia Year 2026 tourism boost.

“Approximately 1.27 million sq ft of City Centre supply is expected to become operational in 2026 alongside new suburban neighbourhood malls, likely pushing vacancy upwards and intensifying competition, prompting retailers to adopt strategic differentiation,” the report said.

Here’s more from JLL:

Malaysia’s retail industry contracted 3% y-o-y as of Q2 2025, exceeding the projected 1% decline, as households prioritised essential purchases over discretionary spending amid rising living costs.

Net absorption remained positive across submarkets, with City Centre adding a new outlet mall. F&B and fashion retailers maintained relatively robust leasing demand. Suburban malls welcomed Flying Tiger Copenhagen’s debut in KL and Kinokuniya’s landmark expansion.

No new supply in the quarter; overall vacancy improves

The quarter saw no new mall completions across either submarket, maintaining the City Centre and Suburban’s supply at 11.5 million sq ft and 37.3 million sq ft respectively. City Centre’s upcoming malls, Ombak KLCC and 118 Mall, are both slated to open by 2026.

City Centre’s vacancy declined to 10.0% as top-performing malls filled remaining pocket vacancies, while underperforming malls adopted diversified retail formats and adaptive space utilisation strategies to improve occupancy levels.

Rents stay steady; landlords have generally not passed on higher sales & service (SST) costs

Gross rents remained stable, while tenant operating costs increased due to the 8% SST, constraining landlords’ ability to implement rent rises. However, retail REITs recorded robust positive rent reversions in 2H25, though this momentum is expected to moderate.

Investment transactions remained muted in the quarter due to capital constraints and market volatility. However, well-performing retail REITs remain favoured given stable rent renewals and tourism recovery prospects despite cautious local investor sentiment.