High-End Retail

Malaysia

Economic News

22 Jul 2010
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In September, Malaysia's Klang Valley - the area consisting of greater Kuala Lumpur - saw the opening of three new shopping malls with a total of 3m sq ft of retail space.



The Pavilion, located in Bukit Bintang, the heart of Kuala Lumpur's shopping district, will feature street-front retail shops and house 450 outlets. Sunway Pyramid, part of the Sunway integrated resort complex located in the suburbs of Kuala Lumpur, is designed with special retail precincts dedicated to different customer lifestyles while the Gardens, located in Kuala Lumpur's Mid Valley area, will house 200 high-end retail shops and offer a roof garden concept aimed at positioning itself as a fine dining destination. Each mall opened with occupancy rates in excess of 90%.



Presently, Klang Valley has 36.6m sq ft of net retail space, and by the end of the year, it is expected that 12 more centres totaling 5.6m sq ft will come on stream. The developments are considered a testament to the growing affluence and sophistication of the market.



In terms of high-end internationally recognised complexes, Malaysia boasts five centres that have won the Prix d'Excellence, an award dedicated to shopping complexes that represent best standard international quality. Suria KLCC, a six-storey shopping mall located under Kuala Lumpur's twin Petronas Towers, is one of them.



Andrew Brien, general manager for Suria KLCC, told OBG, "Retail performance is a great barometer of a country's overall economy, when things are going well, consumers can afford to spend beyond basic functions into luxury."



According to Retail Group Malaysia, which tabulates quarterly retail data on behalf of the Malaysian Retailers Association, retail sales were up 8.2% in the first half of this year compared to the same period last year. This growth exceeds that of the overall economy's, with the Gross Domestic Product (GDP) for the first half of 2007 up by 5.6%. Overall, retail sales grew by 8.4% in 2006, the highest level in six years.



The strong retail growth is attributed to a strong performing economy, urban migration, stable employment, an expanding population and increasing tourist arrivals. Visitor arrivals to Malaysia for 2007 are expected to increase to 20m from 17.3m last year. Malaysia's unemployment rate for 2007 is forecast at 3.5%, putting it ahead of developed nations such as the United Kingdom, Taiwan and Japan. Finally, in terms of population, 32% of the country's 27m people are under the age of 15.



While Malaysia's demographics and strong economic performance are optimistic signs for the country's retail sector, some analysts are wondering whether developers may be rushing into things, and caution that the focus should be on quality, not quantity.



Malaysia plays host thrice yearly to 'Mega Sales Carnivals' in an effort to boost its international profile as a shopping destination. While this bodes well for international exposure and seasonal momentum, according to Brien, "If Malaysia is to truly compete with Singapore as a luxury shopping destination, it needs to evolve from a sale and discount driven mentality into a destination that is seen to be the home of quality retail."



Additionally, others feel Malaysia should offer more liberal incentives in terms of duties and taxes, such as those applied in Singapore, to encourage more foreign retail players to bring their brands to the country.



"In addition to location, the main determinant of retail supremacy is the brands you are able to attract," said Brien.



There is also concern that building additional shopping centres in already heavily trafficked areas will add further to the driving and parking woes many areas in the Klang Valley are already facing.



Overall, while Kuala Lumpur still has a way to go before it matches Singapore as the region's high-end shopping destination, with a slew of new luxury malls springing up and renowned top-end brands entering the country, the retail sector is poised for strong times ahead.

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