APPD Market Report Article

Kuala Lumpur

February 22, 2024

Yulia Nikulicheva, Head of Research & Consultancy, Malaysia


MYR 33.8


Inbound tourism and retail sales increase

  • Visitor arrivals continued to rise as Malaysia recorded 9.16 million tourists (January-June 2023), a 329.6% increase compared to the first half of 2022. The weaker Malaysian ringgit has boosted travellers’ purchasing power, supporting a recovery in tourist consumption. Malaysia’s retail sales experienced an uptick in 3Q23, posting a growth rate of 2.7%, mainly driven by the F&B sub-sector.
  • Ahead of the holiday season, leasing activity remained positive with F&B operators continuing to underpin the leasing demand for restaurants, cafés and tea outlets. Some examples of new F&B stores in the market are Venchi, Heytea, ChaTraMue, Reborn Coffee and Yomaro. Other notable new international retailers in the market include Alo Yoga, Gentle Monster, Marimekko and National Geographic Apparel.

High opening rate for new mall in the City Centre submarket

  • Spanning across 1.3 million sq ft of net lettable area (NLA), The Exchange TRX (MSIA0072) in the City Centre submarket opened with a high opening rate and strong foot traffic. The current tenant mix features a variety of local and international retailers, including luxury fashion, F&B, sportwear and cosmetic brands; its anchor tenant is Seibu, which occupies 250,000 sq ft of the mall’s space.
  • The Suburban submarket witnessed one opening, namely the Pavilion Damansara Heights (MSIA0088), which contributed approximately 1.1 million sq ft of NLA to the market. The mall was opened in two phases, with Phase 1 reportedly achieving 80% occupancy and Phase 2 opening in 2024. Vacancy in the City Centre submarket edged down to 12.1%, but rose to 18.4% for the Suburban submarket.

Rent growth slows in both City Centre and Suburban submarkets

  • Rent growth in both submarkets remained slow but recorded a slight increase, supported by stronger sales and footfall. However, mall landlords remained cautious during the quarter due to headwinds such as higher operating and interest costs.
  • No significant investment deals were announced during the quarter, although there was a slight uptick in investor interest in the prime retail market, particularly from local REITs and foreign investors who already have an existing footprint in the country. Overall, capital values trended upward, while market yields were mildly compressed in both submarkets.

Outlook: Suburban malls to dominate future supply pipeline

  • Over the next 12 months, new supply from the Suburban submarket is expected to make up the majority of new supply in Greater KL, with a potential addition of over 3 million sq ft of new space. We expect higher vacancy with slower rent growth in the Suburban submarket in the coming year.
  • The improvements in inbound tourism and retail sales, as well as the full return of office workers, should continue to render support to the leasing market. Demand from F&B operators is likely to remain strong. Growth in tourism consumption will likely continue to support retail turnover growth and draw interest and confidence from international retailers to expand their businesses in the country.

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

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