Malaysia is projected to have 700 shopping malls with a total net lettable area of 170 million sq ft by the end of 2019. — Picture by Ham Abu Bakar

KUALA LUMPUR, Nov 1 — Malaysia’s 500 or so malls could balloon to 700 by the end of next year.

Although the public may wonder why developers persist in building more despite the abundance, Sunway Malls & Theme Parks chief executive Chan Hoi Choy explained that it is because a well-conceived shopping centre could be lucrative in the long run.

“Successful malls with net lettable areas of one million sq ft can yield an average of RM100 million net property income annually,” he told Malay Mail when contacted.

He also said shopping centres were more resilient to fluctuations in the economy, typically generating moderate growth, even when other property types such as offices and hotels may struggle.

Despite the potential for malls, Chan said caution was now needed due to the surplus of existing shopping centres.

Data from the National Property Information Centre showed that total retail space grew from 105.4 million sq ft to 167.1 million sq ft in just 10 years since 2008.

Chan noted that while there were still pockets of the country that were underserved, the sector already showed clear signs of oversupply in urban areas.

Asked if the land price was a reason why developers keep building malls over other classes of property, he said it was not the sole factor as mall developments were typically more capital intensive.

“Generally, it can easily cost up to RM500 million to build a half million sq ft mall. Factoring in land price and this figure can go up substantially,” he explained.

Other considerations include urbanisation, affluence levels, catchment market maturity, retail gaps, competitive landscape and integrated development mix strategy, among others.

Chan also pointed out that the current batch of malls are part of a mixed development rather than standalone.

Asked if there were other innovative options for developers to consider aside from malls, he said this must be considered based on location.

Zerin Properties head of research and consultancy Roja Rani Applanaidu said malls continue to be attractive to developers as the retail component was a key driver for demand of other property classes.

“Nevertheless, depending on the suitability of the development sites, developers could also venture into healthcare products such as private hospitals, spas or education (international schools and colleges).

“This is due to the growth in ageing population and medical tourism as well as demand for international schools, particularly among the higher income group and expat communities,” she said.

Malaysia Retail Chain Association president Datuk Seri Garry Chua previously said Malaysia will have 700 shopping malls with a total net lettable area of 170 million sq ft by the end of 2019.