Kuala Lumpur’s Shopping Mall Wars Intensify with TRX Opening: Implications for KLCC and Pavilion REITs

With the official opening of the TRX mall attracting crowds eager to experience it first-hand, the battle among large shopping malls in the heart of Kuala Lumpur is heating up. KLCC Property Trust (KLCC, 5235SS, Main Board Real Estate Trust Stocks) and Pavilion Real Estate Investment Trust (PAVREIT, 5212, Main Board Real Estate Trust Stocks) now face increased competitive pressure.

TRX mall, Suria KLCC, and Pavilion KL are now the most centrally located and comparably sized major malls in the city center, each boasting its unique strengths. The TRX mall, situated in the Tun Razak Exchange, offers a fresh shopping experience with numerous new international brands drawing public attention. Suria KLCC, located at the Petronas Twin Towers, is one of Kuala Lumpur’s primary landmarks. Pavilion KL, competing with its two sister malls, Bukit Bintang Pavilion and Damansara Heights Pavilion, adds to the fierce competition.

Analysts predict that the launch of TRX mall will further intensify competition in the real estate trust sector, with Pavilion Real Estate Investment Trust potentially experiencing significant impact. Galaxy Securities analysts note that due to TRX mall’s prime location and its targeting of mid-to-high income customers, it is expected to become a strong competitor for malls under the KLCC Property Trust and Pavilion Real Estate Investment Trust. Pavilion KL and Suria KLCC might face direct competition.

Although TRX mall boasts over 400 stores and a net lettable area (NLA) of 1.3 million square feet, comparable to Pavilion Plaza, it is slightly smaller than Suria KLCC. Analysts believe that the opening of TRX mall might impact Pavilion Plaza more than Suria KLCC, as the latter’s association with the iconic Petronas Twin Towers somewhat mitigates its impact.

“Following Pavilion Plaza’s opening in September 2007, Suria KLCC’s retail revenue remained strong. Financial reports show that in the two years after Pavilion Plaza’s launch, KLCC Property Trust’s revenue still grew by 8.2% and 13%.”

Additionally, analysts think that Mid Valley Megamall, under IGB Real Estate Investment Trust (IGBREIT, 5227, Main Board Real Estate Trust Stocks), is unlikely to be affected by TRX mall’s opening. They believe that Mid Valley Megamall’s location, over 10 kilometers from the city center, along with its product offerings and market dominance, will shield it from significant impact, as the mall is situated in a mature and affluent residential area.

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