APPD Market Report Article

Kuala Lumpur

December 1, 2021

-4.3%

MYR 32.3

Rents
Falling

Footfalls bounce back following the easing of restrictions

  • The easing of National Recovery Plan (NRP) restrictions was good news for malls. The transition to NRP Phase 2 recently has sparked hope for the retail industry to recover. Fully vaccinated individuals in Greater KL (>80% or about 6.8 million) are now able to browse and shop at brick-and-mortar stores, pamper themselves in hair and beauty salons, dine-in and watch movies at cinemas.
  • Given that the government has uplifted restrictions on several business, this move has prompted consumers to resume visiting malls. However, the pick-up in retail footfall in city centre malls has been lagging behind that of neighborhood malls as the majority of office workers are still working from home.

No new project completions, more retail closures

  • No project completions or new additions of projects were observed during the quarter. One project, which was expected to complete in the quarter, has been delayed to the next quarter (4Q21). The project is Mitsui Shopping Park LaLaport KL located in the City Centre submarket with about 1 million sq ft NLA.
  • Vacancy rates increased across all submarkets. More retail tenants closed once movement restrictions were lifted as many of them were already struggling prior to the outbreak of COVID-19. However, we observed some new outlet openings during the quarter albeit the soft market.

Investment interest starts to pick up

  • Most of the malls continued to underperform due to the prolonged pandemic, which led to lower occupancy rates, lower turnover rents, and resulted in further downward pressure on rental reversions. Many landlords continued to support their tenants by offering tenant assistance packages on a case-by-case basis.
  • No transactions were recorded in the quarter. The easing of restrictions, however, resulted in some investors revisiting retail investment opportunities to take advantage of the anticipated recovery. It is likely that opportunistic investors may perceive this period as an attractive time to deploy their capital despite the challenges.

Outlook: Tourist footfall may return to malls soon

  • The Prime Minister hinted that the reopening of travel both domestic and overseas could take place as early as December this year. The reopening of international borders is great news to the retail industry as it will be the homecoming of tourists into the malls in tourist hotspots.
  • It is likely that the reopening of international borders may also spur retail investment activities. We understand that some landlords are actively trying to dispose of underperforming assets to improve liquidity hence this move may be proven timely.

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

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