THE Klang Valley will continue to suffer an oversupply of retail space for years to come as about 18.5 million sq ft of retail space, now under construction or planned, is almost certain to add to the existing 27.4 million sq ft, says Rating Agency Malaysia Bhd (RAM).

It said that some 9.9 million sq ft of retail space was currently under construction and another 8.6 million sq ft represented planned supply.

RAM, in its analysis released yesterday, said that given the current overhang situation and the imminent deluge of retail space, there could be deterioration of 300-500 basis points in the average occupancy rate of 78.5% in the Federal Territory and 84.6% in Selangor.

It said that many shopping complexes were bracing themselves by upgrading their facilities, undergoing facelifts and even conceptualising a second shopping mall to alleviate the threat of losing shopper traffic.

It said these efforts to cater for a more diverse market were not only limited to city malls like Suria KLCC, Sungei Wang Plaza, Lot 10 and Star Hill but also those outside the city centre like Mid Valley Megamall, 1 Utama and Sunway Pyramid.

Major suburban malls seemed to be planning to enlarge their retail space via ''sequels'' with more exciting retail outlets to entice more shoppers.

The proposed ''sequels'' by the suburban malls include Mid Valley, which will expand its current 1.8 million sq ft of net retail space by 1 million sq ft with an additional 6,000 car park bays on top of the current 7,000.

1 Utama will construct another 950,000 sq ft of net leasable retail space while Sunway Pyramid will add 750,000 sq ft of net retail space to the present 850,000 sq ft.

RAM said competition among malls would be intensify when Berjaya Times Square, Avenue K and The Curve make their debut within a year or two.

It said that the existing, upcoming, and newly opened malls such as Maju Junction and the Great Eastern mall; and additional suburban ''sequels'' would have a two-fold impact – pressure on rental rates and shop per traffic.

''When additional retail space swamps the market, the existing rates could face downward pressure as retailers would then be spoilt for choice,'' it said.

RAM said that the existing suburban shopping malls would likely suffer an immediate drop in their traffic as shoppers flock to see the newer, more integrated shopping-cum-entertainment centres like Berjaya Times Squares and Avenue K.

Due to potential spillover effects, it said that the existing city malls might not be as badly affected and could benefit from the increased flow of pedestrian traffic to/from Berjaya Times Square and Avenue K.

However, in the longer term and depending on the mix of retailers in competing malls, shopper traffic should stabilise although not to the current levels by some malls as shoppers returned to their own convenient suburban malls.

It said that city malls might experience a slight dip in shopper traffic then and would have to rely on tourists to sustain themselves.

''Suburban malls will continue to serve their respective catchment areas while city malls will have to rely more on tourists and a good mix of retailers and entertainment outlets to ensure long-term survival in this competitive industry,'' RAM said. – Bernama

Source : The Star  4/4/2003