KUALA LUMPUR (Jan 23): Malaysia’s retail property landscape saw a slight contraction in total shopping mall space in 2025, following the closure and refurbishment of several underperforming malls. Despite the reduction in supply, overall occupancy levels showed gradual improvement, supported by stronger tourism activity and recovering consumer sentiment.
According to the Henry Butcher Perspective — Malaysia Property Outlook 2025 report (as at 3Q2025), total shopping mall space nationwide declined to 17.27 million sq m, compared with 17.97 million sq m in 2024. This represents a decrease of about 3.9%, largely due to rationalisation of ageing or poorly performing retail assets.
Occupied retail space increased to 13.58 million sq m, lifting the national occupancy rate to 78.6%, up from 77.6% a year earlier. The improvement suggests healthier tenant demand, particularly in well-located commercial property in KL and major urban centres in Selangor.
Henry Butcher Malaysia chief operating officer Tang Chee Meng noted that tourism has become a key driver of retail performance, as international visitors tend to incorporate shopping into their travel itineraries.
Tourists, particularly from neighbouring countries and China, are drawn to air-conditioned shopping malls that offer familiar international brands and competitive pricing. This trend has been especially visible in small- to mid-sized Malaysian cities, where price differentials compared with home markets encourage higher retail spending.
Tang explained that as tourist arrivals rise, retail activity naturally follows, providing a boost to shopping malls that are strategically located and well-managed.
The Klang Valley — covering Kuala Lumpur, Selangor and Putrajaya — continued to outperform other regions. As at 3Q2025, the area recorded 272 shopping centres with a combined net floor area of 7.24 million sq m. Of this, 6.06 million sq m was occupied, translating into an average occupancy rate of 83.7%, a sharp improvement from 75.8% in 2024.
Kuala Lumpur alone accounted for 116 shopping centres, offering 3.42 million sq m of retail space. Average occupancy in KL rose to 86.5% in 2025, up from 78% previously, reflecting the resilience of prime commercial property in KL and established retail districts.
Selangor recorded 153 shopping centres with 3.76 million sq m of space, with occupancy improving to 81.2%. Key townships such as Subang, Puchong and surrounding growth corridors continue to benefit from strong catchment populations and proximity to industrial property in the Subang area and manufacturing hubs.
Putrajaya, though smaller in scale, also saw occupancy rise to 85.7% across its three shopping centres.
Penang’s total retail mall space stood at approximately 1.96 million sq m as at 3Q2025, with an overall occupancy rate of 70.8%, slightly below the Klang Valley average.
Penang Island performed better, recording occupancy of around 76%, supported by tourism, domestic consumption and established lifestyle-focused retail destinations. New developments such as Sunshine Mall have helped improve footfall, while upcoming projects like The Light Waterfront Shoppes are expected to further enhance tourism-linked retail activity.
In contrast, retail activity in Seberang Perai remained subdued due to limited new developments and weaker tourism influence.
Retail Group Malaysia (RGM) projected overall retail industry growth of 3.6% for 2025, following stronger-than-expected momentum in the second half of the year. Growth for 2026 is forecast at around 4%.
From a regulatory standpoint, the rollout of Phase 4 of e-invoicing from Jan 1 will require businesses with annual turnover between RM1 million and RM5 million to issue e-invoices for all transaction types. Rental income from commercial properties, including retail and office space in Bukit Jalil and KL city areas, will be subject to service tax if annual taxable revenue exceeds RM1 million.
Meanwhile, SST rates for micro and qualifying SMEs have been reduced to 6%, with the exemption threshold raised to RM1.5 million, offering some relief to smaller retailers.
The government has designated 2026 as Visit Malaysia Year (VMY2026), targeting 47 million foreign tourist arrivals and RM329 billion in tourism receipts. Measures such as extended visa-free entry for visitors from China, India and Asean countries are expected to drive tourism-led spending across retail, hospitality and supporting sectors.
Tang noted that retail is likely to perform relatively well alongside the industrial sector, particularly in areas supported by logistics hubs, factories in Puchong, and industrial land in Selangor that benefit from rising economic activity.
Malaysia recorded 28.2 million international tourist arrivals in the first eight months of 2025, generating RM186.4 billion in tourism revenue — surpassing pre-pandemic levels. Higher hotel occupancy and improved transport infrastructure are expected to further strengthen retail and commercial property performance moving forward.
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