Vacant shops: Is Malaysia building more than it needs?

Goh Lim Thye

Have you ever driven past a row of shops in a housing area and noticed that most of them are empty, dark or simply never opened?

This is no longer an occasional sight. In many parts of Malaysia, especially in growing suburbs, we are seeing more commercial premises being built even as existing ones struggle to attract tenants and customers.

While commercial development is often associated with progress and economic growth, an important question deserves renewed attention: do we really need more commercial premises when existing stock remains significant and new supply continues to be planned?

Recent data from the National Property Information Centre (NAPIC) in its third quarter of 2025 report shows that Malaysia continues to carry a substantial stock of commercial premises in major states.

In the Klang Valley, Selangor recorded 716 shop units and 7,971 shop-office units as existing stock, while Kuala Lumpur recorded 1,197 shop units and 989 shop-office units.

Johor recorded 2,821 shop units and 11,823 shop-office units, while Perak recorded 5,507 shop units and 5,166 shop-office units.

Penang recorded 4,553 shop units and 1,082 shop-office units.

These figures suggest that many states already carry a large base of shop and shop-office units. This large base raises important questions about whether commercial approvals and future supply planning are sufficiently aligned with real demand and actual absorption.

Sustainable growth?

From an economic perspective, the development of commercial premises can stimulate activity.

Construction creates employment, supports contractors and suppliers, and contributes to gross domestic product (GDP) through investment spending.

Retail and commercial premises may also create long-term benefits if they support thriving business ecosystems.

However, these positive effects depend heavily on real demand.

When commercial premises are completed without sufficient demand, the economic benefits become short-lived.

Construction activity may generate temporary growth, but once completed, the market may be left with a long-term burden such as vacant shops, weaker rental performance and underused assets.

Building more commercial premises does not automatically translate into stronger economic vibrancy, particularly when new supply struggles to attract tenants, shoppers and business operators.

Oversupply creates inefficiency and wastage

Commercial oversupply does not only affect developers and investors. It also carries wider economic and social consequences.

Empty commercial strips weaken a town’s vibrancy. Rows of vacant shops reduce street activity, discourage footfall and may gradually contribute to a decline in commercial attractiveness. What was intended to serve local communities can become underused and inactive.

Oversupply can also depress rents and destabilise business sustainability. When too many units compete for the same tenant pool, rental rates weaken and turnover becomes high, resulting in short-lived tenancies and a less stable local commercial ecosystem.

At the same time, capital becomes trapped in non-productive assets. A vacant shop is still a physical structure, but it does not generate meaningful economic output.

This represents inefficient use of land and capital – resources that could have been directed into more productive needs such as better public amenities, community facilities and stronger infrastructure.

Municipal servicing burdens also continue even when shops are empty. Roads, lighting, drainage and waste management must still be provided regardless of occupancy.

Where commercial areas remain largely vacant, long-term servicing costs can become disproportionate to the economic return.

If demand does not support supply, the result is not genuine development. It is wastage and inefficiency.

What others do

International experience shows that oversupply risks can be reduced when planning decisions are more strongly tied to proven need and better use of existing space.

In the Netherlands, a ‘Ladder for Sustainable Urbanisation’ was previously used as a planning tool requiring authorities to justify new urban development based on demand and to prioritise existing areas before expanding further. [This has since been abolished to speed up housing construction amid shortages.]

This planning tool reflects the principle that new retail premises, offices or urban facilities should not be approved simply because land is available, but because there is evidence that supply is required.

Meanwhile, Japan’s experience with vacant and underused buildings has highlighted the value of adaptive reuse: existing structures are repurposed instead of continuing to add new supply. This encourages sustainability, reduces waste and brings idle assets back into productive use.

These examples suggest that better outcomes come not from building more, but from planning based on demand, phasing supply carefully, and reactivating underused commercial premises.

Focus on demand, not output

Malaysia must continue to develop, but the goal should not simply be more buildings.

The focus should be better outcomes: higher occupancy, stronger local business ecosystems, and more efficient use of land and capital.

Commercial premises can support economic development when they meet real demand.

But when sizeable existing stock remains in the market while planned supply continues to expand, it may be time to reassess the approach.

A stronger emphasis on demand-based planning, feasibility evaluation and phased implementation can help. This will ensure that commercial development remains a genuine driver of economic vibrancy – not a source of long-term oversupply.

Commercial growth can be healthy and necessary, but only when it is demand-led and sustainably absorbed.

The priority should be to keep commercial premises active, tenanted and useful to communities, so they become a driver of vibrancy rather than a landscape of vacancy.

Dr Goh Lim Thye is a senior lecturer at the Department of Economics, University of Malaya.

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