KUALA LUMPUR: IOI Properties Group Bhd's acquisition of Tropicana Gardens Mall is likely to be one in many mergers and acquisitions (M&A) property experts expect in the shopping mall space as large mall operators look to build their net lettable area (NLA) through organic and inorganic means.
"We expect to see both M&A and new development in the future. Various mall operators already plan a significant new development pipeline of around four million square feet of net lettable area."
"Smaller operators may see advantages in being acquired rather than remaining independent," Real estate agency Juwai IQI co-founder and group chief executive officer Kashif Ansari told Business Times.
Kashif explained that consolidation strengthens those with the strategy and resources to expand.
"In the mall sector, you are likely to see larger powerful players who have greater leverage with tenants. "The larger operators also reduce their costs by sharing expenses across properties and benefiting from economies of scale. They can invest in new experiences and technologies to improve the retail experience for shoppers," he said.
Kashif pointed out that larger malls will keep evolving into entertainment hubs that offer a mix of shopping and experiences.
The aim, he said, is to draw more visitors, extend their stay, and capture a greater share of their spending.
"The end result should be a better experience for shoppers, higher returns for the operators, and higher revenue for tenants," he added.
CCO & Associates (KL) Sdn Bhd executive director Chan Wai Seen said he does not expect significant new standalone mall developments in the market due to an oversupply.
He explained that the new shopping malls might be built as part of mixed-use or township developments, designed to complement the overall project.
An example would Bloomsvale Shopping Gallery by Kerjaya Prospek Property Bhd, which is part of the bigger 5.2-acre freehold Bloomsvale @ OKR mixed development worth RM1.2 billion in gross development value.
"Due to the oversupply situation, the retail property market trend is becoming extremely competitive."While many major and popular shopping malls have witnessed an increase in footfalls to the pre-pandemic level, many shopping malls have yet to fully recover from the adverse impact of the Covid-19 pandemic," he said.
Chan said many lifestyle shopping malls in the country offer similar tenant mix strategies, hence heightening the market competition in attracting both the shoppers and tenants.
"We foresee major operators of popular super-regional malls and mega malls trumping the smaller and new shopping malls in the market unless these shopping malls can reposition themselves by offering different tenant mixes and usages," he said.
Accoring to the Valuation and Property Services Department's first half of 2024 report on commercial building occupancy and space availability occupancy rates in shopping malls have risen although they continue to remain below pre-pandemic levels.
The report showed that occupancy rate of shopping complexes have increased slightly to 78.1 per cent in the first half of 2024 compared with 76.6 per cent in the previous year.
Correspondingly, the available space has decreased to 3.89 million square meters (21.9 per cent), encompassing 829 buildings nationwide.
Only five states recorded occupancy rates exceeding 80.0 per cent.
Negeri Sembilan and Melaka reported among the lowest occupancy rates at 67.9 per cent and 63.1 per cent, respectively.
In terms of available space, Selangor recorded the highest amount, accounting for nearly 20.0 per cent (741,956s.m.), followed by Johor and WP Kuala Lumpur, which recorded 694,903 s.m and 522,755 s.m. of available space respectively.
Real estate agency Juwai IQI co-founder and group chief executive officer Kashif Ansari said malls provide attractive investments, with reliable recurring income.
He said they can also serve as anchors that add value to other components of mixed-use developments, such as office, entertainment, and residential.
For example the acquisition of Tropicana Mall by IOI Properties has further solidified its position as one of the major operators in the lifestyle shopping mall developments in Malaysia.
Chan said the major mall operators in Malaysia also manage large mega malls and super-regional malls.
These include Pavilion Group, which operates Pavilion KL, Pavilion Bukit Jalil, and Pavilion Damansara Heights; Sunway Bhd, running Sunway Pyramid, Sunway Carnival Mall, and Sunway Velocity; and IGB Corporation, overseeing Mid Valley Megamall/The Gardens and Mid Valley Southkey.
Other notable operators are Lendlease, responsible for Setia City Mall and The Exchange TRX; WCT Holdings Bhd, which manages Paradigm Mall JB; and KLCC Property, operating Suria KLCC, among others.
"Even before IOI Properties acquired Tropicana Garden, they were already the owners of mega malls such as IOI City Mall and other smaller malls like IOI Mall Puchong and IOI Mall Kulai."With the acquisition, IOI Properties will include another super regional mall in its portfolio," he added.