Contributed by John Tan
With 68.2mil sq ft of retail space through 255 malls in the Klang Valley (Kuala Lumpur, Selangor and Putrajaya) at the end of 2016 and more coming up, it raises the question of which will do well and which will not?
Several factors are involved in the making of a great mall such as the tenant mix, accessibility, key anchor tenants, branding and exciting mall atmosphere.
While all the above points are valid, I would like to highlight a critical point that is often not mentioned: The proximity of the malls with a well-tenanted corporate office.
Although there are a few malls that are doing well, I would like to mention five of the malls that come to mind when I think of thriving shopping malls.
1) Pavilion Bukit Bintang
2) Suria KLCC
3) Mid Valley Megamall
4) 1 Utama
5) Nu Sentral
What are some of the common denominators between these successful malls?
Besides having a sizeable space with more than one mil net lettable area (NLA), these malls house several big corporate offices which ensure constant traffic from well-paid employees, i.e., professionals, managers and expatriates.
For example, Pavilion Bukit Bintang houses Menara Standard Chartered, Wisma Genting and Menara Boustead. Suria KLCC houses Petronas, Menara Maxis (within the shopping centre), Menara Public Bank, Wisma TA and Wisma Selangor Dredging across the road.
Mid Valley Megamall houses Boulevard and Arcc offices while 1 Utama houses First Avenue, IBM Tower and Wisma KPMG, all within its proximity. Nu Sentral@KL Sentral houses the corporate headquarters of Shell, CIMB, Bank Rakyat, Axiata and UEM, to name a few.
These office workers provide the much-needed foot traffic into these malls on a daily basis. As most of these workers are only given a one-hour lunch break, they will satiate themselves with food sold within the confines of these malls during their lunch break.
Besides having their lunch, it is also convenient for them to shop for their necessities inside the mall as well.
In today’s competitive corporate world, we spend more time in our offices than we do at home.
Sharing from my personal experience, I used to frequent the San Francisco coffee at KLCC when I worked in Menara Maxis, and there would always be a queue of office workers waiting for their drinks or food every day.
So, it was a big surprise when I heard that the outlet at Paradigm Mall in Kelana Jaya had been closed.
When I asked the barista what happened to their shop in Paradigm mall, his response confirmed my anecdotal view. “There is no corporate offices nearby Paradigm, and during weekdays the residential units don’t provide us with many coffee drinkers as many of them are retirees, and they are not willing to pay RM8 for a cup of coffee”.
Residential units nearby or those placed above a mall do not necessarily provide the much-needed foot traffic that the mall needs to thrive during weekdays as most residents are out working and only return home past 7 or 8 pm daily.
Moving forward, new malls need to be self-sufficient to capture the market to do well and survive the competition. There are several examples where the developers have incorporated offices into their mall projects to ensure foot traffic for their mall tenants.
Upcoming mall projects such as the 1.2mil sq ft NLA Pavilion Damansara will arguably do well given the ten office blocks being developed near the mall. The office blocks will also enjoy a direct covered walkway into the mall coupled with direct access to the Pavilion Damansara MRT.
Similarly, DC mall by Guocoland in Damansara City will benefit from the office workers who will occupy two corporate office towers located beside it. The 33-storey of 530,000 sq. ft. office tower block A will house various operating companies within the Hong Leong Group.
Guocoland expects Damansara City to have the initial traffic of 10,000 people working daily within the integrated development. DC mall’s success, however, will be limited as its size is relatively small.
MCT Group in their master plan for their final phase of development in Subang Jaya is going to develop a 1.5mil NLA mall just opposite the Main Place. To provide the foot traffic for their upcoming mall, MCT plans to establish 1.5mil sq ft of office space above their mall. With a 1:1 ratio between the mall and office space, there is a stronger chance of success. This project, however, has been put on hold at the moment.
The small scale of 350,000 sq ft NLA KL Gateway mall within the Bangsar South enclave will also enjoy the patronage of the working class from two 36-floor corporate office towers which have direct connectivity to the KL Gateway Universiti LRT via a 100m air-conditioned bridge.
At the moment, the tenancy of the office towers is still low, affecting the footfall of the mall.
The soon-to-open EkoCheras, which is located along Jalan Cheras has a 180,000 sq ft office tower connected to its 625,000 sq ft NLA EkoCheras mall. As the office size is less than 30% of the mall size, it is yet to be known whether the offices can be a catalyst to the success of the mall.
Upcoming malls such as Bukit Bintang City Centre’s Lalaport Mall and Warisan 118 retail shopping centre will be integrated with office and residential components. The accomplishments of the malls are yet to be seen and depends on the office spaces being tenanted to well-paid officer workers or not.
In my opinion, the key to a successful mall is to build grade-A office blocks with NLA of equivalent size to the mall. But, it is also equally important to get a high tenancy rate for these office spaces.
If these aspects are well taken care of, the mall will live to stand the test of time and will be able to weather the storm of the oversupply of retail space in the Klang Valley.
1 New Straits Times 12 April 2018
About the Author:
John Tan
John Tan Joon Hooi works in a financial institution and is an enthusiast in the local property scene. His part-time hobby is to be a property commentator.
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