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Shopping Centers Today -> December 2007
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SIZZLING MARKET TRIES TO AVOID OVERHEATING
Kuala Lumpur likes retail. After all, it is the capital of Malaysia, a country that understands the economic power of shopping so keenly that it sponsors official national sales every year to lure bargain-hungry tourists. Shopping is such a focus there, in fact, that steamy-hot Kuala Lumpur (known to the locals as KL) and the adjoining Klang Valley are virtually awash in shopping venues.
“If you look at the numbers, it is pretty scary,” said Allan Soo, managing director of Regroup Associates, a development consulting and leasing firm based in Kuala Lumpur. “We have 122 shopping centers, hypermarkets and department stores spread over geography that’s only two and a half times the size of Singapore. We only have about 6 million people. We really don’t need so many shopping centers, so in that sense, it looks quite insane.”
The metropolitan area’s retail space has swollen from 12.6 million square feet 12 years ago to 39 million square feet now, and in September alone three new shopping centers opened, with a total of 2.7 million square feet. Among these was the posh KL Pavilion (see below).
The retail rush began in the 1990s, when rising incomes, especially from oil, fueled speculative building. Many developers saw retail properties as their most profitable move. The market slowed dramatically with the crash of the Asian economy in the late 1990s, but it has recovered. Malaysia’s overall retail space has expanded at a rate of 25 percent annually over the past several years, says Soo, despite gross domestic product growth of less than 6 percent. Is there another slump coming? Soo says he thinks not, though he believes some of the old, less sophisticated properties have fallen victim to the newer ones and will continue to suffer at their hands. “There has been some consolidation in the market,” he said. “At least 50 percent of the shopping centers have seen a drop in their footfall and [their] rents of up to 30 percent over the last nine years. The new and better ones have kept going.”
And there is room for still more, says Soo. The Greater Kuala Lumpur area can absorb an additional 3 million square feet over the next three years, he says.
SURIA IS A HOT SPOT
If there is any mall in Kuala Lumpur that is virtually guaranteed to draw tourists, it is Suria KLCC. The reason is location: The center is nestled between the massive twin spires of the Petrona Towers, the second-tallest buildings in the world.
“Every visitor to Malaysia can be expected to visit the twin towers,” said Allan Soo, managing director of Kuala Lumpur-based development consulting and leasing firm Regroup Associates. “They are iconic, and the shopping mall itself is very good.”
Suria KLCC (suria means “sun” in Malay; KLCC stands for the Kuala Lumpur City Centre) contains 1.5 million square feet of high-end retail spread over six stories. The mall opened in 1998, at the height of the Asian financial crisis, and got off to a slow start — just 40 of its nearly 300 shops had tenants, Soo recalls. But its fortunes have improved along with Asia’s. Today it is virtually full, and rents have tripled over the past nine years.
Posh pavilion owners expect high sales
KL Pavilion epitomizes Kuala Lumpur’s love of high-end retail. And the 1.3 million-square-foot mall, which opened in September, offers all the usual names when it comes to luxury goods. But the center takes the game up a notch when it comes to design. Twenty-seven of its retail spaces feature soaring, two-story designs that open onto the Golden Triangle district’s main street, Jalan Bukit Bintang, and into the mall. Vast skylights illuminate the seven-story atrium. KL Pavilion was built by a joint venture of development firm Malton and landowner firm Urusharta Cemerlang, and the developers have high expectations: They project retail sales of $M1.56 billion ($465 million) for 2008. Optimistic? Maybe, but Malaysia’s blazing retail economy may make it possible. Retail sales there surged 8.2 percent in the first half of this year alone.
 | Current Issue December 2008 |