Savills Malaysia: Mall occupancy and rents in Greater KL remain stable in 1Q2020

PETALING JAYA (June 12): The average occupancy rate of malls in Greater Kuala Lumpur has remained stable, only falling marginally by 0.9% to 87.2% in 1Q2020 from end-2019, according to Savills Malaysia Research’s report titled “Asian Cities Reports - Kuala Lumpur Retail 1H 2020”.

The average occupancy rate has not declined dramatically despite the Covid-19 outbreak in early 2020, thanks to well-managed malls that are constantly adapting to the changing retail environment, said the real estate consultancy in the report.

“Massive business closures are unlikely to happen at least in the established malls while mall owners have stepped up in strategizing and introducing new commercial terms to maintain occupancy levels.

“Nevertheless, it is reported that around 50,000 or 15% of retail stores in Malaysia will cease operations towards the end of the year, particularly the small and local chain stores,” said the consultancy.

As most brands have put on hold their expansion plans, retail leasing activity is expected to remain unexciting. However, prime rental would likely to remain stable as none of the prime malls have indicated any kind of cut back in rental.

Data from the Department of Statistics Malaysia (DOSM) showed that retail sales in March 2020 fell by 6.6% y-o-y and 9.9% m-o-m, mainly because of a sharp fall in non-essential retail sales.

Retailers in malls report sales having dropped between 50% and 90%, with retailers in tourist zones suffering a drop of at least 70% in sales due to the Covid-19 outbreak and the ensuing Movement Control Order (MCO).

Unsurprisingly, retailers are seeking for rent relief or rental deferment from landlords. “However, this is expected to be a trade-off between extension of leases and rebased rents,” the report said.

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