What new initiatives is Suria KLCC focusing on for 2012?
BRIEN: New initiatives for SURIA KLCC in 2012 revolve around several things. The first I’d like to mention is our further extensions within the mall. We have reconfigured the department stores and added many specialty stores. At Alamanda Putra Jaya we've created a new entertainment area called The Hub, which is leisure and lifestyle. With regards to corporate social responsibility and the environment, we've just commissioned 9,000 sq. meters of photovoltaics, or solar panels, on the roof of Suria, which will ultimately produce about 500 megawatts of power over the full 12-month period, or enough to power about 200 homes.
SURIA KLCC has historically had the highest retail rental rates in the city. How have you managed to balance rates and occupancy?
BRIEN: Traditionally we're always looked at as having the highest rate, and that's a fair reputation. It's about productivity; when you can get sales in stores to a high level, the retailer is actually able to afford a higher rental. You could have somebody paying $1/ft. per year but if his turnover is only $2/ft. per year you're not going to survive. It's that simple. Therefore, by building sales, we actually build the productivity of the mall. Our focus is on sales optimization not just maximization of rent.
What are your current sales per square foot figures and how do they compare with other retailers in the country? What are your projections for the future?
BRIEN: Our current sales per square feet at Suria are in excess of anybody else's. We know that because we've seen some of the other rates come up. In our specialty store sales, we're in excess of $10,500/sq. meter. That puts us in the highest levels anywhere on the face of the planet. This is because we optimize our sales and optimize our mix. The situation at our other malls is also healthy. Our growth is double digits across all malls in terms of specialty store sales. Again, we have been able to apply good, global principles to asset planning. We’ve applied good global principles to retail planning that have delivered premium returns for both the retail partners and our owners.
What are your growth and development plans in terms of new properties and further expansion?
BRIEN: The next phase of development for Suria is the additional space being added at about 350,000 sq. ft. of net livable area. This will be a leisure and lifestyle precinct adjacent to Suria. That is part of an investment that is being put together by KLCC and their joint venture partners QIA. That project should get underway later this year and we would hope to have the retail portion finished by about late 2015. It will be a fantastic addition to, and help cement, Suria KLCC as being the downtown destination.
What are the current major trends in the retail sector in Kuala Lumpur and Putra Jaya?
BRIEN: What's interesting about Malaysia is that the Malaysia consumer has become far more sophisticated over the last 8-10 years and they're looking for international brands. At Suria, we have a plethora of international brands, but Malaysian companies own in excess of 75% of those brands. Therefore, while there may be an international brand, it's actually a local partner that's running the brand. Malaysians are hungry for international brands. They've also become hungry for quality as they've become more sophisticated.
How competitive is the retail sector in Kuala Lumpur and Malaysia?
BRIEN: The competition in the retail sector in Malaysia is a relative term. There are many shopping centers and mall owners that are having difficulty because of the quality of their product. We have good quality product here in downtown KL at Suria KLCC, and at Alamanda Putra Jaya and Mesra Mall on the East coast. We've matched our product to the market by doing an enormous amount of research at all stages of development each year. While competition is tough, the good operators are surviving and that's an indication of the market being robust right across the board.
How has the tenant mix at local shopping centers evolved over the last 2-3 years? What impact has the increase in the number of hypermarkets had?
BRIEN: The tenant mix is evolving towards more international brands across the board including in fashion, general goods, home wares, etc. With regards to hypermarkets, they are a convenient-spaced offer. Their offer is not often broad, but rather the hypermarket brand itself. So, for convenience sake, consumers will go to the hypermarket, but when they want to do a full shop, when they want a special gift, when they want that special item, they will continue to come to regional and super-regional malls for the simple reason that it's more than just shopping for convenience, it's actually an experience. That's why good product, and when I say good product I mean good assets, survive.
Our current sales per square feet at Suria are in excess of anybody else's. We know that because we've seen some of the other rates come up. In our specialty store sales, we're in excess of $10,500/sq. meter. That puts us in the highest levels anywhere on the face of the planet.
New retail centers are opening on an almost quarterly basis in KL and suburban areas. Property consultancy company, Knight Frank, has cautioned that, "This high impending supply may have a detrimental impact on overall occupancy levels." Do you feel that the caution is warranted? What strategies are you employing to deal with the increased retail supply?
BRIEN: It's true that there's an increased supply in Malaysia of retail property; however, what we've got to temper that point with is the fact that supply generally is not equal in quality. The quality of the supply is an important factor; poor assets do not perform well. Our occupancy levels across our assets are all in excess of 90% and at Suria it's actually 99% and has been historically. Our success is due to the fact that we understand the market and probably understand it better than any other asset management company in Malaysia. That is the strength of what we do.
What is your overall outlook for the retail sector in Kuala Lumpur both short-term and long-term?
BRIEN: With regards to the future, Malaysia's GDP is supposed to grow at about 5.1%. The IMF's saying it's going to be 4.6%. We're in double-digit growth at the moment with our sales in 2 of our markets, namely Putra Jaya and Mesra Mall, because they're fairly new. In downtown KL we're in double-digit growth because we've added a lot of great brands. Across the board if you ask me about Malaysia, I'd probably say you can expect to see somewhere around 6-8% growth, depending on whatever else happens throughout the region. The outlook for the retail sector in South East Asia in general is buoyant. If you look at the States, they’re just coming out and showing 3 or 4 % growth. If you look at the UK, London is doing fabulously well, but the rest of the UK is not doing so well. If you look at my home country of Australia, retail's very tough. Asia has survived the global financial crisis very well because it had some great upside to be tapped into; the economies were growing as the nations were developing. In the other markets I mentioned the economies weren't growing nearly as fast. There wasn't the population growth, whereas Asia still has a high population growth. Asia is certainly a great place to be for retail.
What are the prospects for retail investment coming into Malaysia?
BRIEN: In Malaysia, I think that retail investment is a great class of asset, as it is globally. I think it’s important to look at several factors when investing in retail. You need to look at the quality of the potential development, but also at the quality of the people putting it together. You need to make sure that it's well planned and indeed whether the feasibility is robust. Many times companies may go into a development without the proper information with regards to the overall feasibility, which includes looking at the market, identifying the market gap and servicing that gap in terms of retail mix. Rather than just saying there's X population so we can put a mall, it’s necessary to look at what's currently servicing that population and where the market gap is. That's extremely important and often times, overlooked.