Opening of Mustafa's first overseas flagship store in Johor Bahru delayed by a year

JOHOR BAHRU: The opening of Singapore retailer Mustafa’s first flagship departmental store in Johor Bahru has been delayed until the fourth quarter of 2024, a year later than originally planned.

According to officials familiar with the matter, the delays are 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. 

Mustafa, which operates its flagship 24-hour Mustafa Centre in Singapore's Little India district, had announced in January that it would be opening its first overseas departmental store in Capital City Mall, located in Johor Bahru’s Tampoi district. 

The mall, along with the Mustafa store, was then expected to reopen in the second half of 2023 after closing in February 2020 due to financial difficulties. 

Capital World, the parent company of Capital City Mall, announced then that Mustafa was set to complete a RM368 million deal (US$78 million) 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.

Chief executive of Capital World Ivan Hoo told CNA on Wednesday (Oct 4) that Mustafa now wants to lease some of the remaining unsold retail units as it needs the extra space for easier management of the store. 

“For some of the remainder of the unsold retail units, what Mustafa intends to do is to rent from (the strata title owners). In fact, Mustafa is generously offering to rent from them so it can have full control of the space in the mall and design it to suit its needs,” said Mr Hoo. 

“The target now is to open in the fourth quarter of 2024 ... We are working to finish this as fast as possible,” he added.

Mr Hoo, who is assisting Mustafa's overseas investments on a personal basis, told CNA that negotiating with owners of the unsold retail units is tricky due to “legacy issues”. He said that the units were purchased at comparatively high prices and so some strata title owners are expecting a return of 7 per cent in annual rental yield.

Mr Hoo added that the delays are also due to renovation and upgrading works to ensure that the mall is “usable”. 

“When Mustafa and I looked at the mall, we wanted to upgrade the loading dock, make sure the lifts are operable - (that) it can hold and load big items. We basically need to improve the (functionality of the building),” said Mr Hoo. 

When contacted by CNA, co-founder and managing director of Mustafa Centre Mustaq Ahmad confirmed that the target was now to open the firm’s flagship departmental store in Johor Bahru by end-2024. 

“The (progress) is nothing yet, we are still planning and deliberating, it will take time,” said Mr Mustaq. 

“Work to achieve (the target of opening in end-2024) is ongoing. We’ll see how it goes,” he added. 

Mr Mustaq did not elaborate on issues in negotiating with some owners of the remaining retail units in Capital City Mall.

Capital World and Mr Mustaq also did not specify the number of additional retail units Mustafa wants to rent in Capital City Mall. 

Ms Cassia Sia, manager of the mall’s developer Capital City, told CNA that Mustafa, as the anchor tenant, requires more retail space so that it can organise the store as it wishes. 

“For instance, Mustafa may already have 60 per cent of the retail space on the first floor, but it wants to lease the remaining retail space so it can operate across the whole floor and organise it better,” she said. 

“We initially hoped to reopen the mall this year but it's already past September. So we need to execute our plan, make minor modernisation to the space so it will be ready by Q4 next year, in time for the year-end festive season,” she added.  

CNA has also reached out to Capital City Mall's management to get in touch with the strata title owners who are negotiating with Mustafa. 

The 11-storey Capital City Mall, which was completed in April 2018 and opened in October that same year, is located in the Tampoi suburb, around a 15-minute drive from the Johor Bahru checkpoint.

It is also part of a freehold integrated development in Tampoi which includes a 315-room hotel, an 18-storey tower with 630 serviced suites, and 690 serviced apartments across three blocks.

When CNA visited the mall last week, construction was still ongoing at some of the stores. 

There were signboards put up for Hilton Garden Inn Hotel as well as furniture for some eateries. However, there were no signs of ongoing work for Mustafa’s departmental store. 

According to retail and business expert Associate Professor Nanthakumar Loganathan of Universiti Teknologi Malaysia (UTM), construction delays for retail spaces have been common in recent months due to the increase in costs of construction material like cement, steel, aluminium and bricks.  

“A few construction sites in Johor and even in Kuala Lumpur and the west coast of peninsular Malaysia have stalled due to rising costs of construction material. The increased costs have punched holes in budgets of investors and this is a significant problem,” said Assoc Prof Loganathan. 

When asked to comment on whether Mustafa’s flagship store would succeed in Capital City Mall if it eventually opens, Assoc Prof Loganathan said that the Singapore retailer must show local consumers what its value proposition is. 

He explained that there are similar departmental stores in Malaysia which sell cheap groceries, clothes and other goods - such as the Mydin Hypermarket which has a strong presence in the suburbs of Johor Bahru. 

“I don’t know how Mustafa can compete with the local retailers and we don’t know yet who is Mustafa’s target market - is it the lower income or the middle-income group?” said Assoc Prof Loganathan. 

“A lot of Malaysians are facing issues with the rising cost of living and increase in prices of basic necessities like cooking oil, rice and eggs. If Mustafa can offer these products at a reasonable cost and help with this shortage for people in the southern part of Johor, they can succeed,” he added. 

In September, Mustafa opened its first outlet in Malaysia - a jewellery store in Melaka’s Dataran Pahlawan Megamall. 

Capital World previously said that it will pursue real estate opportunities for Mustafa, including "identify potential sale sites in Malaysia and Indonesia to develop into megastores".