Purpose-built offices in Sarawak remains a niche market
KUCHING: Purpose-built offices (PBOs) in Sarawak remains a niche market with limited demand and more or less stagnant, CBRE-WTW Research gathers in its Asia Pacific Real Estate Market Outlook 2021.
According to CBRE-WTW Research, construction of PBO is mostly ad-hoc for owner occupation.
“An oversupply situation persists in the shop office market segment for Sarawak with buyers and tenants dictating rentals and price rates,” it said.
In Kuching, there were completions of a few PBOs this year, including Ibraco Headquarters Building at Northbank and Hock Seng Lee’s Office Tower at la Promenade, both located along the Kuching Samarahan Expressway.
“Some tenants’ movement were observed involving few government agencies to the recently built Baitul Makmur II building at Medan Raya in Petra Jaya and Land Custody and Development Authority (LCDA) and Sarawak Economic Development Corporation (SEDC) Towers at the Kuching Isthmus.
“There were however neither transaction nor any significant renting of office spaces as the newly built PBO were owneroccupied, namely by IBRACO and HSL as their new headquarters and corporate offices. “The Panggau Dayak Towers, launched in 4Q 2020 is significant for the Dayak Community as it will house the Dayak Cultural Foundation (DCF) and Dayak Chamber of Commerce and Industry (DCCI).
“Sitting on 2.05 hectares of land, this nine-storey of PBO will be a landmark for the Ong Tiang Swee area which is bereft of any tall buildings.”
The report revealed that due to the increasing stock and competition for office spaces from shop offices, take up and rentals remain stagnant averaging about RM2.50 per square foot.
Meanwhile, pressured by the glut in supply of shop offices, CBRE-WTW Research saw that units completed in Kuching dropped in the first half of 2020 (1H20) by almost half as to that in the same period last year.
“Based on National Property Information Centre (NAPIC) data, incoming supply for 2020 is estimated at about 568 units.”
Meanwhile, there were reportedly no significant new launches of commercial shops in 2020.
“Although the number of shop units added to the market has decreased, supply remains high and the current Covid-19 pandemic has made it increasingly difficult to maintain rentals and the increasing number of shop units being vacated is a real concern.
“These have greatly reduced the average asking rent for shop units especially the ground floor and affected sales due to increased risk exposure.
In Miri, CBRE-WTW Research noted that it is a challenging outlook for the PBO market due to limited demand or low occupancy.
The group further noted that the on-going trade war which has affected the demand and price of commodities such as palm oil and gas and in turn, the related companies which make up most of the demand for PBO in Miri, has aggravated market uncertainty in recent years. That said, it highlighted that a positive development is Shell’s relocation plan to Miri which would potentially increase demand for PBO property.
“The property overhang or slow take up rate and lack of confidence in the economy will also continue to pose a challenge to the shop office sub-sector. There is also preference for light-industrial properties by occupants with larger space requirements.”
To note, the shop office yield is four per cent with average rentals of RM1.20 per square foot while the average transacted price of a shop office is maintained at RM1.2 million per unit for both years.
Overall, the oversupply situation in Miri is expected to continue in 2021, CBRE-WTW Research opined.
As for the PBO market in Bintulu, CBRE-WTW gathered that it remained stagnant in 2020 with no transaction activity recorded.
“The shop office sector continues its downward trend with fewer transactions compared to last year and shop offices remained in over-supply. The market is very much on the buyer’s and tenant’s side with more options and better negotiating power.
“The shop office yield is expected to remain at four per cent to five per cent for both 2020 and 2021, with rental rates at RM1.20 to RM1.50 per square foot per month and average transacted price at RM1.2 million per unit.”
On a side note, it was highlighted in the report that Pier 99 Project with 144 shophouse units located within Bintulu Waterfront development with a panoramic river view and near to the under construction Jepak-Bintulu Bridge, will be the new landmark in Bintulu. For Sibu, PBOs were stable in 2020, and is expected to continue in 2021.
CBRE-WTW Research said that supply remains sufficient with no transactions recorded for Sibu.
“There are opportunities for corporate companies to build PBOs for mainly their own occupation with some floors rented to ready tenants.
“The shop office market is generally down for 2020 due to the current adverse economic conditions caused by the ongoing pandemic.
“Although rentals have softened, price and values of shophouses especially those in prime and established areas are maintained.”
It noted that rentals average RM1.20 per square foot with RM1.20 to RM1.30 per square foot expected for 2021 and yields are generally maintained at four per cent.