Contributed by Henry Butcher Retail managing director Tan Hai Hsin
Read more: Shopping centres in Malaysia: does size matter? Part I
Size is not the critical success factor of today’s new shopping centre development. It is also not a worldwide trend to build a super-large shopping centre. The location, trade mix, tenant mix, ownership structure and management team determines the success of a shopping centre.
The King of Prussia Mall, the largest shopping mall in the United States, has a net floor area of 2.9mil sq ft with more than 400 retail shops.
However, it is not the best performing shopping centre in the United States. Based on a research study by Boenning and Scattergood in 2017, the King of Prussia Mall is ranked at No. 8 among the most valuable malls in the United States.
The best performing shopping centre in 2017 was Ala Moana Center in Honolulu, Hawaii. It has a net floor area of 2.3mil sq ft. With a sale per sq ft of US$1,450, its sale per sq ft was 88% higher than the largest shopping centre in the United States.
The shopping centre with the fourth highest sales was Woodbury Common Premium Outlets, located in Central Valley, New York. Its net floor area is only 845,000 sq ft. In spite of that, its sale per sq ft was 110% higher than the King of Prussia Mall.
Forum Shops at Caesars in Las Vegas, Nevada has a net floor area of 636,000 sq ft only. It was the seventh most valuable shopping centre in 2017. With a sale per sq ft of US$1,616, its sale per sq ft was 109% higher than the King of Prussia Mall.
In Malaysia, some of the largest shopping centres do not command the highest rental rates per sq ft. Many large shopping malls in Malaysia have multiple ownerships, from a few hundred to a thousand lot owners. These shopping malls find great difficulty to adapt to the market changes. They tend to suffer from either low occupancy rates or low rental rates.
Considering the size factor, the Woodbury Common Premium Outlets and Forum Shops at Caesars are not the largest shopping malls in the United States. Their locations and positioning are the success factors.
The Woodbury Common Premium Outlets is the largest factory outlet in North America. It is located near New York City. It is a favourite tourist destination for many Malaysians who travel to the east coast of the United States. The Woodbury Common Premium Outlets attract shoppers with high purchasing power as well as domestic and international tourists.
Another example is Forum Shops at Caesars, an upmarket shopping centre with many international luxury fashion retailers as tenants. It is located in Las Vegas, a city with the largest concentration of casinos in the continents of North and South America. The main shoppers at Forum Shops include gamblers, affluent customers and international tourists.
Thus, shopping centres in Malaysia that are relatively small can achieve success with its strategic location and proper market positioning. A shopping centre located within Bukit Bintang, Kuala Lumpur City Centre (KLCC) or Jalan Tunku Abdul Rahman (Jalan TAR) has a greater chance of success compared to a shopping centre located in other parts of Kuala Lumpur city centre.
There are also many potentials for speciality shopping centres in Kuala Lumpur. A speciality shopping centre is defined as a shopping centre that specialises one or a limited category of goods and services. Some of the current successful examples include Plaza Low Yat (handphone and computer), Kenanga Wholesale City (fashion wholesale), Plaza GM (general wholesale) and Pertama Complex (leather goods and school uniforms).
Pertama Complex is a speciality shopping centre that has not been duplicated elsewhere in Malaysia. For decades, Pertama Complex is well known as a centre for a wide selection of leather goods, uniforms and custom-made souvenirs. No other shopping centres in Malaysia have this competitive advantage.
About the contributor
Tan Hai Hsin is the managing director of Henry Butcher Retail. You may contact him at tanhaihsin@yahoo.com.
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