APPD Market Report Article

Kuala Lumpur

February 28, 2022


MYR 32.3


Steady footfalls observed as malls operate as usual

  • We observed a significant increase in shopping mall traffic following the resumption of most economic activities and the lifting of the interstate travel ban, which is a good sign for retailers after being hard hit by COVID-19 restrictions. Some malls reportedly recorded 75%-80% of pre-COVID-19 level footfall traffic during weekends from October onwards.
  • Malls are operating as usual versus only 15% to 25% of allowable business categories in the 2Q21 during the Movement Control Orders (MCO) period. Events and exhibition venues in malls have started having expositions again i.e., furniture, baby products, etc. which have attracted large foot traffic especially during weekends.

One mega mall completes during the quarter

  • One project completed in 4Q21; Pavilion Bukit Jalil. Upon its opening on 3rd December, the 1.8 million sq ft mall opened with about 40% occupancy. Anchor tenants include The Food Merchant (grocer), Parkson, Harvey Norman, MR.DIY, Toys “R” Us, HOHM (household and lifestyle retailers) etc. Several other tenants have already been secured shown by “Opening Soon” signs pending renovation completion.
  • Vacancy rates slightly increased during the quarter following the low occupancy attributed from the new mall. Nevertheless, occupancy rates of prime malls remains healthy. Many new outlet openings were observed during the quarter, as retailers have been able to resume and complete renovation works after facing hiccups following a series of lockdowns in precedent quarters.

Yield-accretive assets on local investors’ radar

  • Despite the reopening of the economy and improvement in mall footfall, rental revision is reportedly flat at the moment following the lingering operational challenges faced by retailers. In terms of rental assistance, several malls continue to support their tenants by offering tenant assistance packages on a case-by-case basis.
  • There are local investors on the lookout for yield-accretive assets. While they do not rule out potential near-term acquisitions, they are also looking at other sectors too, not limited to retail. Property developer Malton Bhd is reportedly in talks to sell the newly-opened Pavilion Bukit Jalil to Pavilion Real Estate Investment Trust (REIT).

Outlook: Concerns over facing another lockdown

  • Despite high vaccination rates, daily reported positive cases remained high. The new COVID-19 variant, Omicron, may undermine the recovery of Malaysia’s retail market. The risk of another lockdown in the near future is concerning for Malaysian retailers as well as consumers.
  • Foreign tourists are still missing in Malaysia and it may take up to six months to see a meaningful number of tourist arrivals. The current entry requirements are extensive and could hinder the influx of leisure tourists, which will negatively impact major shopping malls in tourist hotspots.

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

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