TRX Mall’s Impact on Malaysian REITs: Minimal Disruption to Luxury Retail Landscape
Kenanga Research has assessed the influence of The Exchange TRX Mall on Malaysia’s established luxury mall market, finding a limited impact on Real Estate Investment Trusts (REITs) that hold stakes in Kuala Lumpur’s prominent luxury malls. While TRX Mall has positioned itself as a new destination for luxury shopping since its November 2023 opening, Kenanga suggests that it does not notably affect the pull-factor of iconic nearby malls such as Suria KLCC and Pavilion KL.
Tourist and High-Net-Worth Preferences
The iconic Petronas Twin Towers continue to attract tourists to Suria KLCC, while local high-net-worth shoppers still gravitate towards Bukit Bintang. Despite flagship stores from brands like Jimmy Choo, Gentle Monster, and Apple lending TRX Mall an initial advantage, its traffic has reportedly diminished since early 2024.
Trends in Luxury Sales at TRX Mall
A gradual decline in in-store luxury shopping at TRX Mall has been observed, with only 13% of surveyed retailers seeing increased footfall. While lower ground food and beverage outlets maintain lunchtime traffic, luxury retailers report that this does not necessarily translate into sales, especially as affluent Malaysians are increasingly shopping abroad due to a favorable ringgit.
Kenanga’s analysis shows that only 20% of luxury retailers at TRX are reaching monthly revenues over RM3 million, while 30% report earnings between RM1 million and RM3 million. Many still struggle to meet sales targets, with seasonal factors such as the absence of major festivals also impacting luxury sales.
Implications for REITs: “Overweight” Maintained
Kenanga Research maintains an “Overweight” rating on the REIT sector, with Pavilion REIT and KLCC Stapled Group presenting positive risk-reward profiles. The potential impacts of TRX on these established REIT players, according to Kenanga, have likely been factored into the current market, keeping them resilient amidst the shifting luxury retail environment.
By maintaining a foothold in key, high-traffic areas, Pavilion and KLCC REITs stand to continue offering value to investors even as TRX adjusts to evolving consumer behavior in the luxury sector.
