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Mustafa's delayed flagship store in Johor Bahru reveals challenges of the Malaysian city’s retail scene

JOHOR BAHRU: Singaporean Nur Hafizah Daud, 35, travels to Johor Bahru at least once a month to shop for her household needs.  

The kindergarten teacher told CNA that she, her husband and two young children would endure the weekend Causeway jam – typically around 90 minutes each way – to visit various shopping malls for groceries, clothes, toys as well as pharmaceuticals. 

“It’s very satisfying when you calculate the savings, and compare them to how much these things cost in Singapore. Shopping in JB is still more shiok,” said Mdm Nur Hafizah.

She was buoyed by news reports earlier this year that Singapore retailer Mustafa was set to open its first flagship overseas outlet in the end of 2023 at Capital City Mall. The mall is being developed in Tampoi, a 20-minute drive from the Causeway. 

While Mustafa’s main retail outlet in Singapore’s Little India appeals to her with its value-for-money deals for electronics and groceries, Mdm Nur Hafizah said she feels its planned outlet in Johor Bahru could offer these products for even cheaper, given the weakened Malaysian Ringgit against the Singapore Dollar.

However, CNA reported on Oct 6 that the opening of Mustafa’s JB store has been delayed until the fourth quarter of 2024, a year later than originally planned due to ongoing negotiations between Mustafa and some strata title owners who own space in the mall as well as slow progress in planning and construction work.

Mdm Nur Hafizah said: “It’s a little disappointing that there’s a delay. It raises doubts as to whether the project will eventually happen. There are some mall projects in Johor Bahru that have failed, and it would be unfortunate if Mustafa does not eventually follow through (with its plans to open in JB).”

Industry experts say the recent news regarding Mustafa has outlined the sheer unpredictability of Johor Bahru’s retail scene, highlighting how an oversupply of mall spaces and legacy issues surrounding ownership have complicated matters in the shopping mall business across the city.

While the retail industry has seen mixed results in recent times, with abandoned and derelict malls littered across the city’s landscape, observers added that Johor Bahru continues to be a key retail destination, leveraging on its close proximity with Singapore to attract footfall.

BOOST FROM SINGAPORE VISITORS 

While the retail scene in key Malaysian cities such as Kuala Lumpur and Penang are seeing a decline in activity, experts have outlined that Johor has been an exception.

“When I’m in Singapore, I frequent Mustafa Centre (in Little India) because the items there are relatively cheaper, and the mall is close to the town centre. The souvenirs there are also worth the money,” said the car mechanic. 

“But their location in JB is not very good – Capital City Mall is in the middle of nowhere (in Tampoi) and I’m not sure if they can match Mydin’s discounted prices for local Malaysians, many of whom are struggling to cope with the rising costs of living. 

“When I visited the Capital City Mall in 2019, it was a deserted place, most of the shop lots were empty and the indoor theme park was more like a small arcade.” 

Capital City Mall opened in October 2018. However, the mall has been shut since February 2020 after Capital World ran into financial difficulties and had to seek court protection from creditors while restructuring its debts.

Capital World, the parent company of Capital City Mall, announced in January that Mustafa was set to purchase 591 unsold retail units in Capital City Mall, 374 accessory parcels, comprising alfresco and multipurpose areas and all 2,181 car park lots.

LEGACY ISSUES ANOTHER OBSTACLE

Chief executive of Capital World Ivan Hoo had told CNA recently that Mustafa now wants to lease some of the remaining unsold retail units from strata title owners as it needs the extra space for easier management of the store. 

But negotiating with these owners has proven tricky due to “legacy issues”, according to Mr Ho, as the units were purchased at comparatively high prices and so some strata title owners were expecting a return of 7 per cent in annual rental yield.

Legacy issues relating to strata title owners is reportedly a pervasive problem hindering efforts by some parties to rejuvenate abandoned malls in Johor Bahru. 

In July, Johor’s housing committee chairman Jafni Md Shukor reportedly said that the state government was pushing for a “win-win solution” in rejuvenating abandoned shopping malls in the city. 

He identified two malls located in downtown Johor Bahru as examples – Danga City Mall and JB Waterfront Mall. He also identified Skudai Parade, a mall located on the outskirts of the city, as another mall to be redeveloped. 

The Bukit Permai state assemblyman said that these premises were still owned by some parties and that these parties had sold the lots inside their buildings to traders. 

“Solving this issue is not as simple as many people think as demolishing it involves legal issues and huge financial complications,” said Mr Mohd Jafni.

“The real estate value of these abandoned buildings is high with the current value as it is within prime area. But the state government is working towards finding a win-win solution on this matter,” he added.

Danga City Mall, a retail space which has strata title lots owned by different parties, have closed since 2018. Its entrances are now boarded up and there have been no concrete reports on plans to redevelop the area. 

Mr Lee told CNA that although he and his wife still frequently visit malls in Johor Bahru, he would now avoid those like Danga City Mall in its heydays out of safety concerns. The couple is currently expecting a baby.

Instead, they now prefer malls like Mid Valley Southkey and Toppen Shopping Centre, which offer international fashion brands as well as “quality options” for food and beverage. 

He lauded efforts by property developer SKS Group to rehabilitate the abandoned “Pacific Mall” in Jalan Storey, Johor Bahru into a mixed-use development known as SKS Tower. 

He also said fully owned malls, rather than mall lots segmented into different strata title owners, should be the way forward in the retail industry so that a single party has autonomy over how to best utilise the space and attract high quality tenants. 

He noted how the likes of Mid Valley Southkey, City Square and Toppen have benefitted from being wholly owned while the likes of abandoned strata-owned malls such as Danga City and Waterfront City have closed and authorities are grappling with legal issues to have them redeveloped. 

He also cited how Mustafa’s difficulties in opening in Capital City Mall encapsulates this. 

“Retail needs to be planned for retailers and therefore for the customers. It is going to be very demand-led because it’s all about the consumers,” said Mr Soo. 

“So if you do it from a real estate play, meaning it’s very brick and mortar and it’s really to sell and you let the retailer figure out how he wants to do this, then the issues will happen, particularly when you haven’t really got the best location,” he added. 

He added the retail scene continues to revolve around consumerism, infrastructure and demography, and he expects all three to be getting a boost in Johor Bahru with improved connectivity plans between the city and Singapore as well as plans on both sides to set up a special economic zone in Iskandar Malaysia. 

“This will pull more mainstream and even premium brands to the market and this in itself will boost the retail offerings, thus creating an even more attractive environment for the consumers,” said Mr Soo. 

Related:

Commentary: When shopping giant Mustafa meets retail paradise Johor Bahru

The Big Read: Crowds are back at malls, but are happy days here again for brick-and-mortar retailers?
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