Two new malls slated to be completed in Kuala Lumpur by year-end

Both malls will add 2.4m sq ft of new supply.

By year-end, 2.4 million sq ft of new prime retail supply is scheduled to enter the market from The Exchange Mall at TRX and Pavilion Damansara Heights. 

According to JLL, both malls have reportedly garnered some pre-commitments from local and international brands, and retailer interest is likely to grow as the malls launch their openings.

Here’s more from JLL:

The rising price of goods and a weakened Malaysian ringgit are expected to limit consumer spending in the coming months. However, major malls in prime locations should benefit from stronger inbound tourism activity. We foresee ESG initiatives to be a common theme among major mall players in the next 12 months, as some have shown commitments to power their malls with clean, renewable energy.

Positive new opening activity; F&B retailers drive demand

New take-ups were seen in major malls across both submarkets, driven by F&B tenants. Some of these were the first in the market, such as the Moroccan coffee chain Bacha Coffee and EL&N London, a cafe, while other brands continued to launch new branches. The high return rate of office workers also boosted retailer confidence, driving more business openings.

Chinese tourism has not fully recovered, but there was an improvement in foreign footfall, notably in prime malls in the City Centre. Retail sales performance in Malaysia recorded a conservative growth rate of 1.4% for 3Q23, signalling that consumers remain cautious on the back of inflation worries and the weakening Malaysian ringgit.

No new completions come on stream in the quarter

No new stock was added in the quarter. However, a healthy amount of supply is expected to come on stream in the next quarter, namely The Exchange Mall (MSIA0072) at TRX in the City Centre submarket and Pavilion Damansara Heights (MSIA0088) in the Suburban submarket.

With steady occupancy rate observed in most malls, vacancy rates of both the City Centre and Suburban submarkets moderated to 15.0% and 17.8%, respectively, in 3Q23.

Shopping Mall operating costs remain high

Mall landlords continued to face increased operating costs, no thanks to higher utility charges, leading to a higher cost of operations for tenants. In some cases, the higher cost of operations was being passed on to consumers, resulting in more expensive goods. Nonetheless, landlords continuously kept track of operating expenses to ensure their stakeholders’ needs were not compromised.

In a related-party transaction, KIP REIT is buying KIPMall Kota Warisan in Sepang for MYR 80 million from Cahaya Serijaya Sdn Bhd. The acquisition of the mall is expected to complete by 1Q24. However, the acquired mall was not considered a Prime Investment Grade asset, thus, it is not included in our research.

Note: Kuala Lumpur Retail refers to Kuala Lumpur's prime retail market.