A general view of Berjaya Times Square shopping mall in Kuala Lumpur March 14, 2018. — Picture by Shafwan Zaidon

KUALA LUMPUR, March 14 — True occupancy rates in Klang Valley malls may be as low as 40 per cent in some areas, according to a Financial Times (FT) article cataloguing the country's continued obsession with building more shopping space despite chronic oversupply.

Discounting the five premier malls in the Greater Kuala Lumpur area — Suria KLCC, Pavilion, Mid Valley, Sunway Pyramid and 1 Utama — the FT said the retail sector was slowly edging towards a crisis exacerbated by a shift towards e-commerce.

Online retail rose by more than a fifth last year as Malaysians become more accustomed to shopping from the comfort of their homes, and the impact on physical sales has become more apparent with time.

“On-the-ground evidence also suggests that mall operators are still struggling. Many have resorted to providing generous offers to prospective tenants, including year-long rent-free packages. However, such measures have yet to stem the bleeding,” the FT said.

The FT said 18.3 per cent of respondents in its survey of 1,000 shoppers said they planned to make fewer trips to shopping malls in the next 12 months; in KL, this was 22.2 per cent of respondents.

Data from the National Property Information Centre (NAPIC) also showed that another 15 per cent will be added to existing mall space this year.

The agency predicted that total occupancy may dip below 86 per cent, but the FT believed that the extent of the problem was skewed by the success of the five premier malls.

Taking these out of the equation meant that more than one in five stores would be vacant.

“Smaller and newer malls are failing to attract enough retailers or visitors despite locations in dense, affluent areas.

“Entire floors in some malls are now unoccupied, a scene largely unfamiliar before 2015,” the FT said.

While the Malaysian Retail Association reported that total physical retail grew 2.2 per cent to top RM100 billion last year, the FT calculated that 9.6 per cent of this was generated by just three malls: Suria KLCC, MidValley Megamall and The Gardens.

With the seemingly perfect storm of a retail space glut and an accelerating shift away from brick-and-mortar stores, it predicted that malls will attempt to reinvent themselves to cope.

Some malls were already attempting to cope by retooling themselves to offer the currently trendy “co-working spaces”, while another developer has all but abandoned a mall it completed in Petaling Jaya in 2015.

“Unless the retail situation improves, we think small malls will go through a period of consolidation and closures,” it said, when predicting that lager players will now have a field day picking off the struggling competitors.