Malaysia is building malls like crazy – but shoppers aren’t coming | Business and Economy

Petaling Jaya, Malaysia – Looking from behind his counter on a recent Saturday afternoon, computer shop owner Goh Sook Lam surveyed the empty corridors of 3 Damansara shopping mall.

Two levels down, shouts rang out from a taekwondo event on the ground floor of the once-popular shopping centre located on the outskirts of Kuala Lumpur.

“You have a taekwondo competition downstairs, but who is coming up here?” Goh, 48, told Al Jazeera, standing beside longtime customer Rudi Sim, 48, his only spending patron so far for the day.

“My regulars are my business. Walk-ins are less … Sometimes I can’t break even.”

Goh’s experience is far from isolated in mall-crazy Malaysia, where numerous shopping centres are under construction even as many existing complexes struggle to attract crowds.

Home to 33 million people, Malaysia had more than 1,000 shopping complexes at the end of 2023, including centres, arcades and hypermarkets, government data in March showed.

As of 2022, nearly 40 percent of malls and retails centres counted by the Malaysia Shopping Malls Association – 727 in total – were located in the greater Kuala Lumpur area alone, according to data shared by the body.

While many of the Southeast Asian nation’s prime malls enjoy high foot traffic and near-full occupancies, many tenants of less popular malls are finding it difficult to compete amid an explosion in retail space that even the COVID-19 pandemic failed to stymie.

According to a report by the National Property Information Centre (NAPIC), Malaysia’s retail space reached 17.69 million square metres in 2023, up from 16.51 million in 2019.

Despite this expansion, national occupancy rates for retail space were lower than before the pandemic, at 77.4 percent last year, according to the report.

Even before COVID-19, occupancy rates had been in decline, falling from 81.4 percent in 2016 to 79.2 percent in 2019 and 75.4 percent in 2022, the lowest in nearly 20 years, according to the report.

Some of the country’s newest malls have been unfazed by waning demand.

The Exchange TRX Mall, which boasts 125,000 square metres (1.35 million square feet) of leasable space and a 10-acre (4-hectare) rooftop park, opened in November with 95 percent occupancy.

Sitting below Malaysia’s second tallest building, Exchange 106, the mall’s many eateries and premium brand outlets have consistently drawn large crowds since opening.

But not all malls have done as well.

Even in the capital, where occupancies are among the country’s highest, some locations struggle to pull in much-needed footfall.

Opening in early October, the first phase of Pavilion Damansara Heights was relatively empty on a recent weekend visit.

Though its lower floors had dozens of customers, its upper levels had hardly any, with people seen passing by boarded-up lots announcing early 2024 openings.

Outlets declined requests to comment on the state of business.

Some businesses have embraced the challenge of finding ways to stay afloat in less popular malls such as Glo Damansara, which struggles to attract large crowds even on weekends.

Attracted by the “affordable” rent, Veronica David, who runs a bakery-cafe with her husband, said her business has managed to grow despite the mall’s quiet location in the suburb of Taman Tun Dr Ismail.

Focusing first on corporate clients, they expanded operations to include a lunch menu with more items on the way.

“Tenancy (here) was initially low and we thought we were in a wrong location, but within a year we saw positive growth,” the 49-year-old told Al Jazeera.

The couple chose the location as most of their clients are based in the area and Glo’s managers were also “extremely friendly” in meeting their needs.

“We might not get this assistance from other malls since they can be more strict and rigid,” she said.

A restaurant owner at the Hartamas Shopping Centre, who declined to be named, said businesses would only go to malls that were properly built.

“If the developer doesn’t do a good job, you don’t attract the right talent,” the man in his early 40s told Al Jazeera.

Catering to residents of the upmarket Sri Hartamas area, he said the mall had both “extremely” bad and good days.

As such, tenants like him, he said, have to be “very creative” in their marketing to pull in customers.

Hartamas Shopping Centre, Glo Damansara, 3 Damansara and Pavilion Damansara Heights did not respond to requests for comment.

Malaysia Shopping Malls Association president Phang Sau Lian said retailers need to work harder than ever to stand out in Malaysia’s “crowded” retail landscape.

“Consumer trends are lightning fast, and malls must constantly adapt to stay relevant and competitive,” Phang told Al Jazeera, adding that the reasons for underperforming malls include “less than optimum” locations, inaccessibility and oversaturation.

Phang said the most significant shift in consumer trends in recent years has been the emergence of food and beverage outlets as the “key driver” of mall traffic.

“Their percentage of total leased space (has) soared to nearly 30 percent, compared to a single-digit share a decade ago,” she said, adding that the trend is likely to continue.

Foo Gee Jen, an adviser with real estate consultancy CBRE-WTW, said consumers in Malaysia today are often seeking an “experience” beyond just shopping.

“It’s no longer just about buying. All the shopping malls are trying to compete in terms of experience,” Foo told Al Jazeera, pointing to facilities such as TRX Mall’s public gardens and arts and culture centres at other complexes.

“Ageing malls that have not been upgrading are not able to cope,” Foo said.

“If anyone wants to build more malls, they should not be competing against existing ones, but complement (them), because it’s (the scene) very much saturated.”

The difficult environment has led some mall owners to adopt unorthodox approaches to staying in business.

In a since-deleted TikTok video posted in May, a man was shown giving a tour of a Bitcoin mining farm he claimed to be running out of an empty mall in the southwestern state of Malacca.

In September 2021, Malacca-based property developer Hatten Land signed a deal with a Singaporean company to jointly operate at least 1,000 crypto rigs on its properties in the state.

“We (are) re-purposing the malls to include ‘green’ cryptocurrency mining activities,” the developer said on its website, without further details.

Malaysia’s middling economic performance has compounded the challenges facing retailers.

While the economy grew a steady if unspectacular 3.7 percent last year, the ringgit has been on a downslide against the US dollar, sinking to a 26-year low of 4.80 in February.

In an analysis of the Malaysian economy in the second half of 2023, global real estate consultancy Knight Frank said that “overall uncertainties … dampened consumer spending.”

Even so, there are few signs of mall construction slowing down.

There are at least 33 “incoming” complexes with 1.13 million square metres (12 million square feet) of retail space and at least another 10 planned, according to the NAPIC.

Back at 3 Damansara on a recent Saturday afternoon, Goh watched a man browse his shelves for a few seconds before walking away.

Business was a lot better when he first moved to the mall in 2012 under different management, in part due to his shop’s location a few doors from a bustling cinema hall, Goh said.

But in March, the cinema’s owners shut the theatre after 15 years in operation, inviting patrons to frequent its other outlets, the closest of which is located in another mall less than a kilometre away.

With little foot traffic on his floor of the mall, Goh said mall management approached him with the idea of moving to a lower level for a similar rental fee.

“I have no idea,” he said, when asked what the mall should do to pull in customers.

But for him, the options are straightforward.

“Either I move out or see other places here,” he said.