The past, the present and the future?

By Joseph Wong

The early retail landscape during and post-World War II saw the emergence of shophouses, a unique format combining commerce and residence. The upper floors of these developments typically served as living quarters for workers or the owner's family, giving rise to the term shophouses.

These shophouses offered a diverse range of merchandise, from basic necessities like groceries and pharmaceuticals to luxury items such as fashion and household goods. In narrow alleyways, some even housed sin businesses like gambling and opium dens or even places to house the concubines of rich individuals as evident in Ipoh’s Concubine Lane. 

Since their inception, shophouses have adhered to the fundamental principles of real estate: prices and rents decrease with elevation as well as the alfresco kaki-lima or five-foot way which provided essential weatherproof pathways for pedestrians. While the residential aspect of shophouses has diminished over time, their commercial appeal remains robust. They continue to be a significant part of urban communities, often included in development plans as highly sought-after investment assets. The enduring demand for shophouses ensures their relevance in modern real estate markets.

Transition to shop offices

As urbanisation increased, the shophouse concept evolved into shop offices located in business centres near new residential areas. These structures remained a prominent feature in Malaysia’s urban and suburban landscapes, with rows of shop offices continuing to be constructed. Shop offices, typically ranging from two to seven stories, became one of the most preferred office typologies. However, shophouses did not disappear from the landscape - they evolved, incorporating modern materials and often reaching up to four stories.

Modern shophouses and shop offices often share similar exterior designs, with differences primarily in the upper floor layouts. Modern shophouses typically feature residential layouts with room divisions while shop offices offer flexible, undivided spaces that can be customised according to business needs. This flexibility has made shop offices particularly popular in new suburban areas of Kuala Lumpur.

The evolution from shophouses to shop offices also involved regulatory considerations. According to Dewan Bandaraya Kuala Lumpur (DBKL), shop offices fall under the commercial development category, with specific regulations mainly applicable in areas like the Warisan Zone in the city centre. For business centres with shop office typology, the authorities monitor the usage of plot ratio and the proposed number of stories, ensuring compliance with fire department requirements.

However, the ongoing urbanisation and increasing consumer demand for diverse merchandise have driven the evolution of retail spaces. This shift has led to the development of more organised and amenity-rich retail estates, with shopping malls becoming the preferred format to meet these socio-economic needs.

Despite these changes, shophouses still hold significant value for consumers. To understand their appeal, consideration has to be given to the preferences of retailers and how they view these two formats as seen in Table 1.

The future of retail spaces

As urbanisation continues and consumer preferences evolve, both shophouses and malls will need to adapt to stay relevant. The Covid-19 pandemic has further accelerated changes in retail, with an increased emphasis on e-commerce and hybrid shopping experiences.

For shophouses, the digitalisation of this asset type is becoming more prolific. Shophouse retailers are increasingly integrating online sales channels with their physical stores to reach a broader audience and enhance customer convenience. 

In addition, the cafe scene in Malaysia has experienced significant growth, with a noticeable increase in both small, independent coffee houses and multi-chain local and international brands entering the market. These cafes are increasingly leveraging the concept of providing functional working spaces to attract customers. Features like free WiFi, numerous power outlets and suitable seating arrangements have become standard in larger cafes within major commercial areas. Certainly, maintaining strong community ties through more personalised services and unique product offerings will continue to be a strength for shophouse retailers.

In the case of shopping malls, they are also evolving into lifestyle centres, offering experiences beyond traditional shopping, such as entertainment, dining and wellness services. Embracing sustainable practices and innovative technologies will be crucial for malls to attract environmentally conscious consumers and stay ahead of market trends.

As shophouses have unique advantages and challenges to shopping malls, retailers must carefully consider their business model, target audience and market conditions when choosing the best retail format. 

As the retail landscape continues to transform, it will be interesting to see how the next generation of shophouse designs adapt to sustaining success to suit the future generations.

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