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Outlet centres offering better deals to investors and retailers

Outlet centres

KUALA LUMPUR (March 5): Outlet centres — which account for 0.1% of the total retail industry in Malaysia — are becoming popular among investors and retailers in Malaysia as they offer higher returns to investors and more affordable and flexible spaces to retailers.

“The concept is appealing to investors because the rate of return on investment is higher than that of a conventional mall in the city centre,” said LaurelCap Sdn Bhd head of commercial real estate Lou Minn Yian.

While the rental rates of outlet centres are lower than regular shopping malls — the former typically charges RM3 psf to RM7 psf per month, while the latter’s rates can range from RM3 psf to RM100 psf per month, depending on the mall — outlet centres still offer attractive returns as they have lower land and construction costs compared with malls, especially those located in the city.

“As for retailers, the rental rates are lower and they have the flexibility of a larger retail space to design the stores,” she added.

Moreover, managing director of Savills (Malaysia) Allan Soo said that outlet centres have the leeway to sell luxury goods at significant discounts compared with conventional malls.

“Most of the local retailers are distributors of franchisees, not direct brand owners or manufacturers and are not able to give a lot of discounts (at shopping malls) because they have to pay royalties,” he stressed.

However, the number of outlet centres is not at an oversupply level due to their location as they are spread out across the country, remarked Lou.

Soo said: “Ideally, there should only be a few such centres in the country, so that they are able to operate well and create a healthy situation, and keep rents stable and sustainable. If that happens, they can become strong property investments.

Upcoming projects such as Kuala Lumpur International Outlets (KLIO) in Putrajaya, Genting Premium Outlet (GPO) in Genting Highlands, and Design Village Penang in Batu Kawan, Penang are expected to attract both the local and international markets.

KLIO, which has a built-up of 400,000 sq ft and 2,000 parking bays, is located in Sime Darby Property Bhd’s 2,350-acre township in Putrajaya and will cost over RM400 million.

Meanwhile, GPO will offer gross lettable area of 300,000 sq ft and 4,000 car parking bays on a 600,000 sq ft parcel.

Last but not least is Design Village Penang, which will take up 400,000 sq ft on a 40-acre mixed-use development and will cost RM300 million. 

For the full story, read the March 7 issue of City & Country, the property pullout of The Edge Malaysia. Subscribe here for your personal copy.

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