Repurposing the old to create a new lease of life

As the number of shopping malls run the risk of closure, owners and operators might need to seek an alternative solution for their premises.

We occasionally stumble across shopping malls that are either completely abandoned, unfinished or have only a few tenants and customers. Some floors are even blacked out or restricted, indicating that they are completely dormant and unattended.

Despite the existence of these underperforming and struggling properties, new malls seem to emerge every year. Malls that have opened or are in the process of opening include Mitsui Shopping Park Lalaport, The Exchange TRX Mall and Warisan Merdeka Mall. New brands expected to enter the market include Zepp Hall Network, Seibu, Cineplex and Takashimaya. This unfortunately puts more pressure on the malls that are already facing difficulties.

While Retail Group Malaysia in its latest Malaysia Retail Industry Report is projecting a 6% growth rate for the industry in 2022, several malls are still seen as struggling to fill their vacant spaces. 

And if they cannot ride the retail wave, then they might face closure in the worst-case scenario. For the older shopping malls which were closed even before the pandemic, their future looks even more bleak as any hope of revival appears dashed. The only alternative left is to repurpose the mall, turning it into some else. 

From malls to warehouse

Mall repurposing is beginning to take place in Malaysia, following a similar trend as experienced in other nations across the world. This scenario is already playing out in the United States and many other industrialised countries with industries that are further evolved than Malaysia's.

Should Malaysian mall owners and operators be concerned about this likely outcome in the near future, even though the business is changing due to the current post Covid-19 pandemic and economic situation?

It is quite obvious that shopping malls, which have been hit hard by a drop in sales and foot traffic especially in the last two years, have devised new strategies to stay afloat. Some smaller shopping centres have begun turning their retail space into e-commerce warehouse centres, adapting to the sudden increase of online shoppers.

A prime example of this is e-commerce behemoth Amazon.com Inc (Amazon). Long before the epidemic sent online purchases soaring, Amazon began buying up underperforming malls and converting them into warehouses and distribution centres. According to Coresight Research, Amazon has already converted 25 mall spaces into distribution centres since 2016.

For businesses looking to employ retail warehouses to meet rising e-commerce demand, there are numerous advantages. Because retail locations have the natural advantage of being available, conversion initiatives are already ongoing in markets with high vacancy rates.

The premium real estate space of these retail locations, such as major junctions or highway interchanges, is one of the biggest advantages. Every shopping centre is intentionally located in a specific region. The big-box stores want loading docks and easy access for trucks so they can come and go as they please. They also have high ceilings and ample space, which are essential for most retailers.

Every great opportunity, however, comes with its own set of challenges. The majority of shopping malls are not zoned for industrial use. Industrial facilities are noisy, and they attract a lot of heavy vehicle traffic. Depending on the mall's geographic location, zoning requirements will vary greatly at the state and local levels.

It may be difficult to persuade a planning board to change land use permissions for a major commercial location such as a shopping mall, especially if the mall is flanked by residential properties. The promise of jobs and economic development might be enough to convince decision-makers in some areas.

With new malls opening every year, it is disappointing to see some of them go to waste and stay empty. Although constructing warehouses is a wonderful start, other activities might be considered when repurposing large shopping malls. Health centres, stadiums, halls and parks are all excellent ideas to keep in mind, said a property observer.

“Repurposing these developments can give struggling malls a new lease of life and provide a better, yet completely different approach to the community,” he said. 

Resilient malls

On a brighter note, not every mall is suffering badly. Some of the established ones are highly resilient, bouncing back from the effects of the multiple movement control orders and the weakened economy as a result of the Covid-19 pandemic.

Particularly in Kuala Lumpur's Golden Triangle, where many malls were experiencing poor business are now coming back stronger. 

As long as no lockdowns or harsh mobility restrictions are enacted to combat the Covid-19 outbreaks, the retail sector is projected to stay favourable this year, said Pavilion Kuala Lumpur retail chief executive officer Datuk Joyce Yap.

Yap is optimistic of the retail sector’s positive growth.

“Provided there are no further lockdowns or heavy restrictions, I am optimistic to see Malaysia’s retail sector benefitting from the country’s economic growth with increased consumer spending and footfall in our malls,” she told StarBiz in a recent email interview.

The past two years were one of the most challenging periods for the retail industry, she said, adding that the recovery to the pre-pandemic level will be gradual.

An increasing number of lots at shopping malls are vacated. - NORAFIFI EHSAN/The Star.

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