US-based Horizon to develop outlet mall 40km from the city
SHOPPING in the Klang Valley is about to take on a new dimension with the development of its first outlet centre, or outlet mall. Resembling Johor Premium Outlet (JPO), Horizon Group Properties Inc from the United States says the Kuala Lumpur International Outlet (KLIO) may well be the best among its stable of outlet malls in the United States.
The Chicago-based Horizon group develops only outlet centres. It is the third largest in the United States, says its director of leasing Greg Clarke during a trip to Kuala Lumpur.
KLIO will be located 40km south of the city and 10km north of the Kuala Lumpur International Airport (KLIA) at the intersection between toll-free B15 highway to the KLIA and the Elite Highway. It will be the first development to be built in a new township of about 2,235 acres being master planned by the Sime Darby group.
KLIO will be one of two major focus of the township, the other being Xiamen University from China. KLIO will be undertaken by Horizon Outlet Shoppes Sdn Bhd, a joint venture between Horizon Group Properties and Mainstay Holdings Sdn Bhd, a local property and construction firm. The 70:30 JV purchased 40 acres of land from conglomerate Sime Darby to build KLIO.
The land purchase was formalised on April 25 this year. Mainstay has the majority stake.
Horizon will develop the project with its JV partners and will also undertake the leasing of the mall.
“We will bring the relationships we have established with international retailers who are already with us and who are already here as full-priced stores,” he says.
When built at more than RM400,000, KLIO will have a total of 400,000 sq ft. It will be developed over two phases with the first phase to take up 26 acres and the second phase 4 acres. This second phase will be an extension of the first phase.
Clarke says phase one is expected to have more than 140 retailers.
The structure resembles the alphabet L with a centre court and food and beverage (F&B) oulets located at each end of the structure. While most of the outlets will be in single-storey space, some of the premium brands will occupy duplexes.
The project is designed by an international team of architects from Ross Adams USA who worked on Horizon’s stable of outlets in the United States. It has 10 and the group has opened an average of one outlet a year thus far. It is also working with China to have an outlet mall there.
Clarke says they are currently doing the designs for KLIO and will be submitting them to their partners who are coordinating the different process. Construction will start in September this year and completed by July 2016. They are working towards a 95% occupany or more when it opens.
Outlet centres vs standalone malls
Clarke says outlet centres or malls form the second generation of retail industry and apart from offering merchandise similar with other malls, prices will be a lot less.
“Prices at outlet centres are typically between 40% and 70% lower because rent at outlet centres are typically lower, staff per shopper are lower although the space may be bigger,” he says.
He says the retail environment may be less decorated compared with the retail space inside a standalone mall. “Shoppers like both brands and value,” he says. From market studies, Clarke says shoppers tend to stay longer in outlet malls and come in larger groups.
KLIO will have an open outdoor environment but unlike the JPO, all the walkways will be covered for shoppers’ convenience and comfort.
“We will offer better parking facilities, all of which will be covered. There will be about 2,000 car park bays located at ground level and space for more than 25 coaches.”
The mall will have six entrances from the car park including the drop-off area. All the outlets will be located one level above. There will also be more quality F&B outlets, he says.
Clarke says the plan is to have between 15% and 20% of the space, or 60,000 to 80,000 sq ft, for F&B outlets. On this point, it differs from its US outlets which only have about 5% of F&B space.
This will be Horizon’s first international outlet centre. It is working on another centre in China currently, with a separate partner. The progress of that development is about the same as this KL venture.
On its strategy, Clarke says retailers like Coach, Nike and Polo – while other brands like Hugo Boss and Burberry offer previous season’s merchandise or odd sizes.
Because it is located on a master planned university township, there is the potential that it may enjoy promising sales.
“I wish I can say we will be bringing in new retailers into KLIO but logistically, unless they already supply to their stores here, new brands will not be here. Retailers in outlet centres always follow their full-priced stores,” he says.
Asians go for brands
The percentage of luxury goods will be much higher in Malaysia than its US centres as Asians tend to like brands a lot more. The merchandise mix include accessories like bags, casual and children’s wear and sport wear.
On whether it is too early to talk to retailers, Clarke says on the contrary, negotiations should start now.
“It is not too early to talk to retailers to get their commitment. We do not construct and then ask for their commitment. Instead, we ask for their commitment and then constuct.
“This is the discipline we bring into this joint venture. Retailers like to know the position of their outlets and who their neighbours are because it helps them to plan,” says Clarke.
On the location of the mall which seems far from the city, Clarke says although it may come across as an outstation location, it is within the Greater Klang Valley.
It has great visibility as it is located at an intersection of two major highways. Secondly, it is part of a Sime Darby master planned township and is about 2km from the Salak Tinggi ERL station, he says.
He says generally, outlet centres are located some distance away from their full-priced stores.
“While this location is not a goal of ours, it nevertheless supports the visibility of our development. Being near the KLIA is not necessary a plus because people do not shop before they get on a plane or get off a plane.
“I am less concerned about the airport, but more concerned about the seven million people who live in Klang Valley and their spending habits as well as the nine million tourist and their retail spending,” he says.
The growth of airport shopping space seem to be the current trend with the heavy retail emphasis by KLIA and KLIA2.
While the previous emphasis used to be airport-related infrastructure with retail being a small portion of its development, the trend seems to have change today.
Malaysia Airport Holdings Bhd (MAHB) is also planning for a commercial development known as Gateway@KLIA2, which is a 70:30 joint venture between MAHB and WCT Holdings Bhd.
The other commercial development is the Mitsui Outlet Park KLIA. The joint venture between MAHB and Japan’s Mitsui Fudosan will be one of the largest factory outlet shopping mall in South-East Asia with 270,000 sq ft of commercial area targetting KLIA and KLIA2 passengers and surrounding population. The airport cities development will be an ongoing project.
MAHB general manager for corporate planning, Randhill Singh says in a report: “Our new vision is to be a global creator of airport cities.”
Other airports aggressively adopting the airport cities plan are Amsterdam’s Schiphol Airport and South Korea’s Incheon International Airport.