Retail demand remains resilient, supported by improved retail spending and expansion

• Retail demand strengthens, driven by increased shopping footfall, growing consumer spending, rising tourist arrivals and supportive government-led initiatives such as the launch of Malaysia Mega Sale 2024.
• Prime shopping centres attract new local and international brands, with notable expansions of international luxury, fashion, athleisure and F&B brands such as Louis Vuitton, Urban Revivo, Descente, Undefeated, PUMA and Canadian coffee chain Tim Hortons.

The Suburban submarket welcomes the completion of a new neighbourhood mall

• Sime Darby Property’s Elmina Lakeside Mall officially opened, adding around 214,000 sq ft of NLA to the supply. The 2-storey neighbourhood mall has achieved 98% occupancy, with Jaya Grocer and Harvey Norman serving as anchor tenants.
• Vacancy rates declined in both submarkets in the quarter. The City Centre’s vacancy rate fell to 11.3%, driven by sustained demand for prime mall spaces and limited new supply, while the Suburban submarket’s vacancy decreased slightly to 18.3%.

Investment activity picks up, led by local investors

• Major local property groups actively acquired retail assets. A notable transaction was Tropicana Corporation Bhd’s sale of Tropicana Gardens Mall to IOI Properties Group Berhad for MYR 680 million, highlighting continued investor interest in prime retail properties.
• Rent growth remained slow but recorded a slight increase from the previous quarter as both submarkets demonstrated active leasing progress and improved sales. F&B players led the expansion activity, but this sector typically contributes lower rents.

Outlook: Large upcoming supply to push up vacancy rates in both submarkets

• An upcoming supply of 1.16 million sq ft and 3.08 million sq ft of NLA are expected to enter the City Centre and Suburban submarkets, respectively, in 2025. Despite a positive demand outlook, this large supply is likely to result in increased pressure on vacancy rates.
• Rents are expected to grow, albeit at a slower pace, driven by demand from local and international retailers. Landlords are expected to enhance their consumer shopping experience and offer an attractive tenant mix to remain competitive in the market.