APPD Market Report Article

Kuala Lumpur

February 28, 2023

Yulia Nikulicheva, Head of Research, Malaysia


MYR 33.3


Manpower shortages hinder retail recovery

  • On the back of a better-than-expected 3Q22 retail sales growth rate of 96.0% y-o-y, the rate for 4Q22 is projected at 6.0% y-o-y due to market normalisation, economic challenges and 4Q21’s high base (26.5%). However, optimism remained for the Christmas and New Year celebrations to fuel holiday shoppers. The overall retail sales growth rate for 2022 is estimated at 31.7% y-o-y.
  • Just as with the construction sector, the labour shortage issue has also negatively impacted the retail industry, both for new openings and daily operations. This shortage is prevalent across the board for both the local and foreign workforce, affecting the entire retail supply chain. 

Each submarket sees one new mall opening

  • A refurbished mall in the City Centre submarket, The Starhill, was added back to the supply basket in the quarter. A new Suburban mall, Datum Jelatek Shopping Centre, recently opened in November 2022. The mall reportedly achieved approximately a 70% pre-commitment rate and occupancy is expected to reach 95% by 4Q23.
  • Overall occupancy has improved slightly with a number of malls having achieved stable occupancy. Store openings continue to outpace store closings. However, the current rate of stores opening could potentially have been higher were it not for staffing issues that affected opening dates.

One mall transacts in the Suburban submarket

  • Overall rental rates have improved slightly. Rental reversion was reportedly positive for malls situated in prime locations. For less established malls, it is likely to remain flat or even trend downwards slightly. For these malls, increasing occupancy rates through attractive rents is an expected imperative.
  • In a related party transaction, MTrustee Bhd, trustee of Pavilion REIT, is buying Pavilion Bukit Jalil shopping mall for MYR 2.2 billion from Regal Path Sdn Bhd. Regal Path is a joint-venture company of Malton’s wholly-owned subsidiary Khuan Choo Realty Sdn Bhd, Qatar Investment Authority’s wholly-owned subsidiary Q PBJ Sdn Bhd, and Tan Sri Desmond Lim’s private vehicle Jelang Tegas Sdn Bhd.

Outlook: Challenging factors remain a concern to retail recovery

  • New supply over the next 12 months will come from four projects, two of them being The Exchange Mall at Tun Razak Exchange and Pavilion Damansara Heights Mall. Each is expected to add an NLA of more than 1 million sq ft.
  • The retail sector is expected to experience a challenging year ahead due to concerns affecting its growth. This includes an increase in cost of living and inflation, continuous manpower shortages, and a potential decrease in foreign tourist arrivals should COVID-19 cases peak again.

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

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