Malaysia is building malls like crazy – but the shoppers aren’t coming | Business and Economy

Petaling Jaya, Malaysia – Looking behind his counter on a recent Saturday afternoon, computer store owner Goh Sook Lam surveyed the empty aisles of 3 Damansara mall.

Two levels below, screams echoed from a taekwondo event on the ground floor of the once-popular shopping mall located on the outskirts of Kuala Lumpur.

“You have a taekwondo competition downstairs, but who comes here?” Goh, 48, told Al Jazeera, alongside long-time customer Rudi Sim, 48, his only big-spending customer so far that day.

“My regular customers are my business. There are fewer walk-ins… Sometimes I can’t break even.”

Goh’s experience is far from isolated in Malaysia, where numerous shopping centers are under construction, although many existing complexes have difficulty attracting crowds.

With 33 million people, Malaysia had more than 1,000 commercial complexes at the end of 2023, including shopping malls, arcades and hypermarkets, government data from March showed.

In 2022, nearly 40 percent of shopping malls and retail centers counted by the Malaysia Shopping Malls Association – 727 in total – were located in the Kuala Lumpur metropolitan area alone, according to data shared by the body.

While many of the Southeast Asian country’s major shopping centers enjoy high foot traffic and near-full occupancy, many tenants of less popular shopping centers are having a hard time competing amid an explosion in commercial space that even the pandemic hasn’t seen. of COVID-19 managed to prevent.

According to a report by the National Property Information Center (NAPIC), Malaysia’s commercial space reached 17.69 million square meters in 2023, up from 16.51 million in 2019.

Despite this expansion, national commercial space occupancy rates were lower than before the pandemic, at 77.4% last year, according to the report.

Even before COVID-19, occupancy rates were in decline, falling from 81.4 percent in 2016 to 79.2 percent in 2019 and 75.4 percent in 2022, the lowest level in nearly 20 years. according to the report.

Some of the country’s newest malls haven’t been bothered by the decline in demand.

Exchange TRX Mall, which has 125,000 square meters (1.35 million square feet) of leasable space and a 10-acre (4-hectare) rooftop park, opened in November with 95% occupancy.

Situated beneath Malaysia’s second tallest building, Exchange 106, the mall’s many restaurants and premium brand stores have consistently attracted large crowds since opening.

But not all shopping malls performed the same.

Even in the capital, where occupancy is among the highest in the country, some locals are struggling to get much-needed movement.

Opened in early October, the first phase of the Damansara Heights Pavilion was relatively empty on a recent weekend visit.

While the lower floors had dozens of customers, the upper levels had almost none, with people seen walking past boarded-up lots announcing openings in early 2024.

Media outlets declined requests to comment on the business situation.

Some businesses have embraced the challenge of finding ways to stay afloat in less popular shopping centers, such as Glo Damansara, which struggles to attract large crowds even on weekends.

Attracted by the “affordable” rent, Veronica David, who runs a bakery-cafe with her husband, said her business has managed to grow despite the mall’s quiet location in the suburb of Taman Tun Dr Ismail.

Focusing first on corporate customers, they expanded operations to include a lunch menu with more items on the way.

“The lease (here) was initially low and we thought we were in the wrong location, but within a year we saw positive growth,” the 49-year-old told Al Jazeera.

The couple chose the location because the majority of their customers are in the region and Glo managers were also “extremely friendly” in meeting their needs.

“We may not receive this assistance from other malls as they may be stricter and stricter,” she said.

A restaurant owner at Hartamas Shopping Centre, who did not want to be named, said businesses would only go to shopping malls that were properly constructed.

“If the developer doesn’t do a good job, you don’t attract the right talent,” the 40-something man told Al Jazeera.

Serving residents of the upscale Sri Hartamas area, he said the mall has had “extremely” good and “extremely” bad days.

As such, tenants like him, he said, have to be “very creative” in their marketing to attract customers.

Hartamas Shopping Centre, Glo Damansara, 3 Damansara and Pavilion Damansara Heights did not respond to requests for comment.

Malaysian Shopping Malls Association president Phang Sau Lian said retailers need to work harder than ever to stand out in Malaysia’s “crowded” retail landscape.

“Consumer trends are extremely fast-paced and shopping centers must constantly adapt to remain relevant and competitive,” Phang told Al Jazeera, adding that reasons for shopping centers’ poor performance include “sub-optimal” locations, inaccessibility and oversaturation.

Phang said the most significant change in consumer trends in recent years has been the emergence of food and beverage outlets as the “main driver” of mall traffic.

“Its share of total rented space has risen to nearly 30%, compared to a single-digit share a decade ago,” she said, adding that the trend is expected to continue.

Foo Gee Jen, consultant at property consultancy CBRE-WTW, said consumers in Malaysia today are often looking for an “experience” beyond just shopping.

“It’s not just about buying anymore. All malls are trying to compete in terms of experience,” Foo told Al Jazeera, pointing to facilities such as the public gardens at TRX Mall and arts and culture centers in other complexes.

“Old malls that have not been modernized cannot cope,” Foo said.

“If someone wants to build more shopping malls, they shouldn’t compete with the existing ones, but rather complement them, because the scenario is very saturated.”

The difficult environment has led some mall owners to take unorthodox approaches to staying in business.

In a since-deleted TikTok video posted in May, a man was shown giving a tour of a Bitcoin mining farm he claimed was operating in an empty shopping mall in the southwestern state of Malacca.

In September 2021, Malacca-based real estate developer Hatten Land signed an agreement with a Singaporean company to jointly operate at least 1,000 crypto platforms across its properties in the state.

“We are repurposing malls to include ‘green’ cryptocurrency mining activities,” the developer said on its website, without further details.

Malaysia’s middling economic performance has compounded the challenges faced by retailers.

Although the economy grew at a steady if unspectacular 3.7 percent last year, the ringgit has been in decline against the US dollar, falling to a 26-year low of 4.80 in February.

In an analysis of the Malaysian economy in the second half of 2023, global property consultancy Knight Frank said “general uncertainties… have reduced consumer spending”.

Still, there is little sign of a slowdown in mall construction.

There are at least 33 “entry-level” complexes with 1.13 million square meters (12 million square feet) of commercial space and at least 10 more planned, according to NAPIC.

On a recent Saturday afternoon at 3 Damansara, Goh watched a man browse his shelves for a few seconds before leaving.

Business was much better when he moved to the mall in 2012 under different management, partly due to his store’s location just a few doors down from a busy movie theater, Goh said.

But in March, the cinema’s owners closed the theater after 15 years of operation, inviting customers to visit their other outlets, the closest of which is located in another shopping center, less than a kilometer away.

With little foot traffic on his floor of the mall, Goh said the mall management approached him with the idea of ​​moving to a lower level for a similar rental rate.

“I have no idea,” he said, when asked what the mall should do to attract customers.

But for him, the options are simple.

“Either I move or I look at other places here,” he said.