Shopping Malls: Dying or Thriving? 

E-commerce vs brick and mortar retail
Monday 2 December 2019
Shopping malls still have a place in Southeast Asia

In the battle between e-commerce and brick and mortar retail, where do shopping malls stand?

As far as mall operators and developers are concerned, despite being in the age of growing e-commerce, the market for brick and mortar retail is still going strong in the Southeast Asian region.

Take a look at these facts, figures, and statistics to see how brick and mortar retail and shopping malls still have a place in Southeast Asia:

Pavilion Kuala Lumpur

It’s hard to miss the immense Pavilion mall in Kuala Lumpur, strategically located smack dab in the tourist hub of Bukit Bintang. The mall is owned by property tycoon Desmond Lim Siew Choon, who according to Forbes, sits at number 23 in Malaysia’s 50 richest list with US$780 million net worth to his name. Lim and his wife Tan Kewi Yong own 37% of Pavilion mall which is a key asset of the Pavilion Real Estate Investment Trust.

Pavilion Kuala Lumpur first opened its doors in September 2007; in November 2016 it introduced a new section, Elite Pavilion Mall, to lure in more cash. According to an article in The Star, the new “high-end” section brought in higher rental revenue and electricity income for the mall, allowing Pavilion REIT’s 1H19 revenue to grow 10.7% year-on-year. The article added that this new addition is expected to help drive Pavilion REIT’s performance.

CapitaLand MalaysiaMall Trust

CapitaLand Malaysia Mall Trust (CMMT), a real estate investment trust (REIT) focused on shopping mall development with an established portfolio of malls and office blocks across the country, is probably best known for their successful ventures out of the Klang Valley area such as Gurney Plaza mall in Penang and East Coast Mall in Kuantan. Managed by CapitaLand Malaysia Mall REIT Management Sdn Bhd, other properties in CMMT’s portfolio include Sungai Wang, 3 Damansara (formerly Tropicana City Mall), The Mines as well as the Tropicana City Office Tower. According to their website, the company’s portfolio has a total net lettable area of 2.9 million square feet and is said to be valued at approximately US$965 million.

However, an article in The Star reported CMMT’s final year 2018 results dropped below expectations “due to weaker rental revenue, lower interest income and higher property operating expenses”. The article added that CIMB Equities Research which conducted the study said 2018 turned out to be a “relatively good year” for their Penang business with Gurney Plaza recording positive rental reversions of 4.2%. Meanwhile, the East Coast Mall in Kuantan recorded a 2.8% surge. Possibly, the stiff competition from other malls in the Klang Valley area is likely to play a role in the reduction of their year-end results.

NWP Retail

Indonesian shopping mall developer NWP Retail’s impressive portfolio reigns over the entire country, with malls in West Kalimantan, West and Central Java, and a number of new projects set to be in Kalimantan, Sumatra, Java and Sulawesi. NWP Retail is a joint venture by the New York based private equity company Warburg Pincus, which is also its co-founder, and PT City Retail Developments Tbk (NIRO).

The company recently completed a US$200 million fundraising as part of their goal to further expand their business across Indonesia, according to Bloomberg. The article added that the developers seek to double the number of projects in Indonesia in the span of three years.

SM Prime

Philippines’ giant mall operator SM Prime Holdings recently recorded an 8% surge in its net income at the end of the third quarter of 2019 to US$543 million, a big boost from the previous year’s US$461 million on new malls and higher condominium unit sales, according to an article in the Philippines’ Business Mirror.

The article added that SM Prime’s consolidated operating income showed a 17% growth to US$810 million from US$690 million in 2018. It also added that for the July to September quarter alone, their net income rose 22% to US$164 million from US$134 million in 2018; its revenues also showed an increase of 13% to US$553 million compared to US$490 million in 2018. It’s numbers like these that prove that malls are thriving in the Philippines.

This article is an excerpt from UNRESERVED’s December 2019 issue from the article SHOPPING MALLS: DYING OR THRIVING

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