KL prime retail rents moving up, says CBRE

KUALA LUMPUR: The Klang Valley retail market has improved from the last two years with more positive and faster leasing rate, according to C B Richard Ellis' (CBRE) second quarter (2Q) Kuala Lumpur Retail Market View released this month.

CBRE said occupancy rates have improved slightly as well in the first half of 2010 from last year and average occupancy is generally high with average rates of selected prime and non-prime malls in the Klang Valley estimated at 92% at the end of 2Q, whereas rates for selected malls in Kuala Lumpur were slightly below 90%, it said.

Rents rose slightly during 2Q as well and as this is the rent review year for some major malls such as Suria KLCC, Pavilion, Mid Valley Megamall, Gardens, Sunway Pyramid 2 and AEON Bukit Tinggi, overall rents may move up further, said CBRE. "There are reports that prime rents in Suria KLCC and Mid Valley have already risen by 10% to 30%.

"Suria KLCC prime rents have surpassed RM100 psf, and it will be interesting to see the change in the tenant mix as some under-performers exit this location," it added.

New mall launches during 2Q 2010 include Empire Gallery in SubangAccording to the market view report, there was an increase in retailer demand during 2Q 2010 which was almost non existent in 2009. Many retailers have specific allocations for multiple new outlets this year.

However, some shopping centres will still find this year tough going as about 10 malls with over three million sq ft of net lettable area (NLA) are scheduled for completion this year, it said.

Hence, CBRE believes the Malaysian retail market is beginning to divide itself into niches and submarkets such as the Bangsar/Mont Kiara, Subang and Petaling Jaya areas. "The battles that will be fought in the future will be localised and the winners will be those with superior locations, tenant mixes and concepts," said the real estate consultancy.

According to CBRE, the supply of retail space in the Klang Valley amounted to 41.2 million sq ft as at end-2Q2010, 3% higher than supply as at the end of last year.

Of the new supply of shopping centres during 1H2010, which totaled one million sq ft, about 45.6% was located in Kuala Lumpur while the remainder was in suburban areas, said CBRE. New launches during the quarter include Empire Gallery in Subang while seven new malls are expected to be completed during the remainder of 2010 including SS2 Mall, CITTA in Ara Damansara, 1 Shamelin in Cheras, One Mont'Kiara and Space U8 in Bukit Jelutong.

"We expect the trend to hold for the remainder of this year, as 46% of projected supply for 2H2010 is in Kuala Lumpur, while the remainder is in suburban areas. These calculations include malls under refurbishment as well," it added.

CBRE's research also found that Malaysians on average spend almost 16% of their gross income on retail spending compared to 17%-18% in Hong Kong and Singapore and around 14% in Thailand and in the Philippines.
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