APPD Market Report Article

Kuala Lumpur

September 4, 2023

Yulia Nikulicheva, Head of Research & Consultancy, Malaysia


MYR 33.6


The malls are bustling with visitors

  • Shopping traffic has returned to pre-COVID-19 levels. Shoppers were seen visiting physical outlets and dining in their favorite cafes and restaurants. Malaysia recorded 4.5 million tourist arrivals in the first quarter of this year with most of them coming from ASEAN countries. This is in line with our observation on foreign visitors in shopping malls, which is back to pre-pandemic levels.
  • The recent quarterly retail sales performance in Malaysia for 1Q23 recorded a 13.8% y-o-y, driven by the Chinese New Year celebration in January as well as the one-month school holiday in February-March. For 2Q23, retail sales growth is projected to slow to 2.6% (2Q22: 62.5%), as many retail sub-sectors are expected to undergo a normalisation path after a strong recovery in 2022.

A new mall in the Suburban submarket opens

  • A 650,000 sq ft Suburban shopping mall, MSIA0081—KSL Esplanade Mall in KSL Bandar Bestari, Klang—opened on 31 May 2023. The four-storey mall has 350 shops and has reportedly achieved about 70% occupancy with a variety of tenants that include a supermarket, a cinema, a swimming school, a roller skate centre, a play area, an extreme park and food and beverage outlets.
  • Steady occupancy rates were observed in most malls, with several notable new openings witnessed in the quarter. We have also observed a department store closure in a Suburban submarket mall after operating there for nine years. This was not their first store closure, and the closure was reportedly due to the company’s downsizing as a result of the past five years of being in debt.

As electricity bills go up, so do operating costs

  • Higher rental income due to increased occupancy, rent revenue, and advertising and marketing income at retail malls was reported among REITs. However, net effective rent growth is slowing due to the increase in outgoings.
  • The increase in electricity tariff adjustments resulted in a significant increase in monthly electricity bills. Rising utility bills have increased operating costs. Landlords continuously monitor operating costs to optimise efficiency and ensure stakeholder needs are not compromised.

Outlook: Earnings pattern is likely to hold up in coming quarters

  • The highest passenger traffic at the airport was reported in May, with a total of 2.98 million from the international sector, indicating that tourist arrivals have now returned to pre-pandemic levels. This is a positive development, especially for malls that have a high dependence on foreign tourists.
  • With business as usual now, the earnings pattern seen in 1Q23 is expected to hold up in the coming quarters. The earnings growth forecast is mainly backed by positive rental reversions and stable occupancy rates. Nevertheless, landlords are still cautious as there are risks, such as rising operating costs.

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

Talk to us 
about real estate markets.