KUALA LUMPUR (Feb 29): Sunway Real Estate Investment Trust (REIT) said it is planning asset improvements and development works with contracts totalling about RM1 billion approved over the next two to three years.

Asset enhancement initiatives (AEIs) planned include reconfiguration of its crown jewel Sunway Pyramid mall with a budget of RM190 million to be done in the fourth quarter of 2024 (4Q2024), the trust said in its annual report. Sunway Carnival Mall, meanwhile, is undergoing a RM360 million refurbishment through 3Q2025, while Sunway Pier is being redeveloped for RM370 million, with work to be completed in 2027, the REIT said.

“We believe that the ongoing AEIs across our portfolio will help us achieve greater asset yields moving forward,” said chief executive officer Clement Chen. “However, we are mindful they may result in short-term disruptions and closures that may impact profitability growth in the financial year ending Dec 31, 2024 (FY2024).”

The planned AEIs come at a time when shopping mall owners and operators are grappling with intensifying competition, amid a rising number of retail malls in the country. Consumer spending has remained resilient, while tourist arrivals have largely recovered.

The Klang Valley region alone will add another two million sq ft of shopping mall space this year, according to property consultancy firm Knight Frank. Current retail space totals about 70.2 million sq ft, including recently opened Pavilion Damansara Heights and The Exchange TRX.

“Sunway REIT must continue to explore and execute AEIs to enhance the appeal of our properties in order to maintain, if not improve, our property yields,” Chen said in the report.

Sunway REIT, which also manages five office buildings with 1.6 million sq ft in net lettable area, flagged oversupply of office space, especially in the Klang Valley, which may limit growth of the sector.

The office sector in Malaysia is also seeing an “immense amount of incoming supply” in 2023 and 2024, Chen said. “The overhang of vacant office space, especially in the Klang Valley, will adversely affect rental growth prospects,” he noted.

The trust generated 67% of its revenue last year from 3.1 million sq ft of retail space, and about 12% from offices, with the remainder from industrial properties and hotels.

Distribution per unit (DPU), or dividends paid to holders of the REIT, rose to 9.30 sen for FY2023, from 9.22 sen for FY2022. “Moving forward, we anticipate the completion of the various AEIs to drive DPU growth further,” Chen added.