Dead mall scenario in Malaysia

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Contributed by Tan Hai Hsin

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Since 2016, there has been a significant concern for the oversupply of retail space and failed shopping centres in Malaysia. Previously, the local news reported on the shopping centre industry in Malaysia with headlines such as ‘oversupply’,’dying’, ‘dead mall’ and ‘ghost mall’.

In early 2017, an infamous property consultant predicted that 20% of shopping centres in Klang Valley would close down in the next five years. To exacerbate the situation, it was also reported that a few hundred shopping centres and retail stores would be shutting down in the United States, the shopping centre capital of the world.

There are many reasons for the closure of shopping centres in the US. Online retail is just one of the many reasons. Hence, we need to get the perspective right. The online retail sale is not replacing shopping malls.

With over 108,000 shopping centres in the US, the closing down of 200 malls only represents 0.18% of the total supply of the shopping centres. The same goes for the retail shops. Of the 3.2 million brick-and-mortar retail shops in the US, a shut down of 1,000 shops will represent about 0.03% of the supply.

In reality, the failed shopping centres (or commonly known as dead malls) have remained empty for an extended period. I have seen many of these in China and the U.S. As for Malaysia, we can find them throughout the country.

In Penang, ASAS Plaza, ASAS Parade, Plaza Utama and City Parade were shopping centres launched during the 1990s and abandoned after the 1998 economic crisis. These buildings have been left empty and dilapidated for almost 20 years.

In Kuala Lumpur city centre, the most notable abandoned shopping centres located in the prime areas are Plaza Rakyat and CN Gallery. Plaza Rakyat is next to a LRT station and a walking distance to Chinatown while CN Gallery is located at the main traffic junction of Bukit Bintang shopping district.

Peninsula Plaza is the first modern air-conditioned shopping centre in Seremban. Completed in the late 1970s, it was the most happening shopping centre in Negeri Sembilan. It has been closed for ten years now, abandoned and an eyesore along the main road.

In Johor Bahru, Lot One located near to causeway is a classic example. It remained shut down and abandoned for more than 15 years. Another example is Pacific Mall that was opened during the last economic crisis and shut down several years later. Bought by a local developer a few years ago, the old mall is yet to commence any refurbishment work.

These failed shopping centres will have to face an uphill task to be revived. Their challenge is not due to the weak retail market and oversupply of retail space, but because each of them is owned by multiple owners from 30 to 500 property purchasers. The owners might be dead, migrated to overseas, cannot be contacted, and a few taken over by the financiers.

During this period of economic uncertainty, landlords of existing shopping centres in Malaysia need to work closely with the tenants to ensure the mall have sufficient sales to survive. While the landlord may offer temporary rental incentives for retailers, the latter needs to play its part to get the shoppers to buy.

Nowadays, rental is no longer the most critical success factor of retail business anymore. Retailers want to operate in a shopping centre with shoppers’ traffic. They rather pay more rental rates to operate in shopping centres with traffic, than somewhere with 50% lower rental but with less visitors.

Based on observation, several critical success factors of shopping centres in Malaysia are:

  • All retail shops are owned by a single landlord, not a large number of individual owners.
  • It is managed by a team of professionals and a proactive management team
  • Responsive to changes in retail markets and consumers’ shopping behaviour and patterns

About the contributor

tan_hai_hsinMr. Tan Hai Hsin is the managing director of Henry Butcher Retail, a shopping centre consultancy firm in Malaysia. You may contact him at tanhaihsin@yahoo.com.

 

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