Rental rates at malls in secondary locations expected to drop

PETALING JAYA: Shopping malls in secondary locations are expected to see a drop in rental rates due to stiff competition and weak consumer spending, especially in food and beverage, according to CBRE-WTW.
“The top 10 malls will not be affected at all as they have good tenant mix, A&P (advertising and promotion) and a long list of tenants waiting to get in. However, malls in secondary locations will be hit, with new malls coming up and they are all aiming for the same tenants,” its managing director Foo Gee Jen said.
He said the drop in rental rates would not exceed 15% as most leases come with three-year rental reviews, whereby the increase or decrease in rental rates will not exceed 15%.
Malls that sign leases with base rent plus turnover rent, the impact would be greater as any drop in the tenant’s sales would be reflected in the rental.
Foo added that many new malls use base rent plus turnover rent to attract tenants.
Last year, total retail space in the Klang Valley stood at 55.09 million sq ft, of which 55% was within KL city centre and 45% outside KL. Retail space is expected to increase 10.8% this year to 61 million sq ft in the Klang Valley.