Armed with new retail brands, Malaysia malls go all out to court shoppers 

[KUALA LUMPUR] After visiting her parents in Kuala Lumpur on the first day of the Chinese New Year last month, Mavis Ng – a 33-year-old accountant from Malaysia – headed to the city centre to pick up some pastries at the newly-opened Paris Baguette cafe at the Pavilion mall.

To her surprise, the downtown area, which is usually quiet during the Chinese New Year – at least for the first two or three days – was thronging with people.

“I couldn’t believe it. I waited nearly an hour to get a table” she told The Business Times.

She observed that the majority of shoppers that day are locals like her, taking the chance to check out the new offerings at Kuala Lumpur’s golden triangle at a time when many people are away, having gone back to their hometown or on holiday at other states or overseas.

The Malaysian capital’s retail landscape is abuzz these days, thanks to new entrants such as Paris Baguette, the South Korean bakery cafe chain that opened its first store in Malaysia in January, adding to its footprint in Asia that also includes Singapore, Cambodia, Indonesia and Vietnam.

According to Tan Hai Hsin, the managing director of both Henry Butcher Retail and Retail Group Malaysia, there were at least 50 international brands from 16 countries that entered Malaysia for the first time in 2022.

Last month, there were numerous reports that Apple is preparing to open its first Apple store in Kuala Lumpur, with job listings already up for what would be the US tech giant’s first expansion in a new country since 2018.

Tan said that more foreign brands are on the way to Malaysia this year, including some of the world’s top F&B giants. American fast-food chain Shake Shack is on its way, while Black Tap – a New York restaurant famous for its burgers and milkshakes – will open in Kuala Lumpur soon. There will also be restaurants by English chef Jamie Oliver and Canadian chef David Rocco.

Seibu Kuala Lumpur, Malaysia’s first luxury Japanese department store, will be the anchor at The Exchange TRX, an integrated development by real estate group Lendlease.

Daniel Ma, the deputy managing director of property consultancy firm Nawawi Tie Leung, said that after enduring more than two years of hiatus due to the Covid-19 pandemic, many shopping mall operators are busy reconfiguring their spaces and tenant mix to attract shoppers and boost sales.

Pavilion Bukit Jalil recently opened an exhibition that features over 3,000 of Vincent van Gogh’s artworks, as part of the mall’s effort to inject more cultural and arts elements to draw new crowds.

Over at Starhill Gallery mall, the developers transformed it into an integrated development called The Starhill, featuring four floors of refurbished retail space (downsized from seven floors previously), with its other levels converted into hotel rooms operated by JW Marriot.

“Other than the new facade, new entrants such as Taiwan bookstore Eslite Spectrum, luxury brands Audemars Piguet and Balmain, and Italian jewelry brand Roberto Coin, have brought shoppers back to Jalan Bukit Bintang (a popular street in Kuala Lumpur) again,” said Ma.

A fresh supply of high-quality shopping malls in prime locations in Kuala Lumpur, such as Lalaport, The Exchange TRX and 118 Mall – is the main factor that attracts these big brands to consider expanding their presence in Malaysia, he added.

Nur Farah Syifaa, an equity analyst at Maybank Investment Bank, said the traffic footfall at most shopping malls in the Klang Valley area in the fourth quarter of 2022 were about 80 per cent of pre-Covid levels, but this traffic was mainly driven by locals.

Nevertheless, turnover has returned to what it was before the pandemic, she said, noting that this has led to a positive outlook for retail malls and an anticipation of better rental income this year.

Tan from Retail Group Malaysia said that a full recovery will take place by the end of 2023 when greater numbers of foreign tourists come back and more brands take up the remaining spaces in many malls.

For investors looking to tap into the growth of Malaysia’s malls, stock analysts said they can consider real estate investment trusts (Reits) which have exposure on retail businesses and benefit from a resilient rental income stream.

Rakuten Trade’s vice-president of equity research Thong Pak Leng said Malaysia Reits which own retail assets in prime locations are seeing their earnings improve this year. China’s reopening will also give a boost to these retail Reits, he added.

He noted that the downside risks will be an interest rate hike by Malaysia’s central bank, with many analysts predicting one or two more rounds of a 25 basis-point increase later this year.

Bank Negara delivered a cumulative 100 basis points in rate hikes in 2022, pushing the overnight policy rate back to its pre-pandemic level of 2.75 per cent. The central bank unexpectedly paused hikes at the end of its last meeting in January, with some observers going so far as to suggest this marked an end to the current rate hike cycle.