Shopping mall industry warns of strain from SST expansion, calls for relief in Budget 2026

Malay Mail

5 days ago

KUALA LUMPUR, July 23 — The shopping mall industry is urging the government to reconsider the expanded Sales and Services Tax (SST), citing its impact on rentals, leasing and renovation services as operators face rising operational costs and narrowing profit margins.
In its latest Shopping Mall Industry Survey 2024–2025, the Malaysia Shopping Malls Association (PPK Malaysia) highlighted a growing imbalance between operating expenses and revenue, warning that the sustainability and competitiveness of malls are under threat.
In a statement today, PPKM said that although SST is imposed on tenants, it inevitably affects the entire ecosystem — compressing rental affordability, affecting lease renewals, and straining cost recovery for landlords who are already subsidising daily operations.
Rising costs versus limited revenue growth The survey, conducted among 61 malls nationwide between 2024 and 2025, found that average operating expenses are now 27 per cent higher than the average service and promotional charges collected — a sharp rise from 13.4 per cent in 2022.
The report attributes this widening gap to escalating electricity tariffs, higher licensing fees, increased regulatory compliance costs, and the expanded SST which now includes property-related services.
PPKM stressed that this cost imbalance is occurring in an industry that plays a crucial role in Malaysia's economy — providing over one million jobs, including mall staff, retail tenants, outsourced service providers and contractors.
Malaysia's shopping mall landscape currently comprises about 490 malls, offering 167 million square feet of net lettable area (NLA). Including standalone hypermarkets and other retail centres, the figure rises to 733 establishments spanning 196.2 million sq ft — with an estimated real estate value of RM153 billion.
Smaller malls and retail centres under 500,000 sq ft account for the majority — 81.5 per cent of total establishments and over half (54.4 per cent) of total retail NLA.
While the Klang Valley and central region remain the main retail hubs, malls are increasingly well-distributed nationwide, reflecting the sector's significance across all states.
Evolving with the times — at a cost
Despite mounting costs, shopping malls continue to adapt to changing consumer behaviour — evolving beyond retail spaces into experiential destinations.
Malls that remain competitive now blend retail with dining, entertainment, and sustainability-focused initiatives to stay relevant in a shifting market.
But innovation comes at a cost, the statement noted. Operators are investing in enhanced experiences and sustainability features aligned with sustainable development goals — all while operating under shrinking margins and added strain from the SST expansion.
The expanded SST, which came into effect on July 1, raised tax rates on several services and items previously taxed at 0 to 5 per cent, with new rates ranging from 5 to 10 per cent. Essential goods remain taxed at lower existing rates.
Based on survey findings, PPKM reiterated its call for the government to address these challenges in Budget 2026, particularly by reviewing the SST structure and introducing broader cost relief measures that would enable malls to continue supporting employment, tourism and domestic consumption.
While the industry remains resilient, the report notes that growth has moderated compared to pre-2024 levels — and without policy adjustments that reflect current economic realities, the mall sector could struggle to maintain its role as a key pillar in Malaysia's retail and services economy.