Property uptrend to resume only in 2018/19

> Market will find its level next year and peak again in 2020/2021, says expert

KUALA LUMPUR: The property market will only start its upward trend again in 2018/2019 before peaking again in 2020/2021, said Axis REIT Managers Bhd head of investments Siva Shanker.

“Although things are looking bad now, it won’t be like that forever. Everything is a cycle. 2017 will see the market finding its level and the kneejerk reaction will subside,” he said at Rahim & Co Research’s seminar titled “The Malaysian Property Market: Opportunities Amidst Uncertainties” yesterday.

“In 2018/2019 we will see the market beginning to level out and start its upward trend again while in 2020/2021 we will see the market peaking again,” he added.

Siva, who is also past president of the Malaysian Institute of Estate Agents, expects commercial office space to remain lacklustre in 2016 and 2017.

“With the additional office space expected to complete by the end of 2016 on top of the still available space in the Klang Valley, the general market will continue to be a tenants’ market,” he said during his presentation on office market trends at the seminar.

In Kuala Lumpur and Selangor, there is a total of 92.7 million sq ft of purpose-built office space with a further 5.8 million sq ft of supply coming into the market by the second half of this year. These new office buildings include Public Mutual Tower, JKG Tower, Menara Ken and Menara Hong Leong.

Meanwhile, occupancy rates of offices in Kuala Lumpur stood at 83%, compared with nearly 90% in the second half of last year.

“Office usage is shrinking; who will take up all this space? The occupancy rate for KL offices usually hovers around 86-89%. A 7-percentage point drop may seem small but it is actually a lot and it may drop further next year,” said Siva.

He said leasing transactions have been subdued while some buildings have started to slash rents as oil and gas companies continue to cut space and the banking sector reduces branches and staff size.

“Decentralised locations continue to receive better interest, especially from companies that do not need a city centre address. These locations have cheaper rent, maybe 20-30% cheaper. In addition, the MRT line completion will greatly benefit these locations,” he said.

Although landlords and building owners may consider reducing rental rates to attract tenants, Siva said, rent reduction may not be the answer as lowered rents mean less money for maintenance.

“When you collect less rent, you will have less funds to maintain your space, hence you will attract lower quality tenants.

“If you must reduce rents, make sure your services are up to mark. This will enable you to raise rents when the market improves,” he added.

Commenting on foreign investments, Siva said Malaysia is still attractive but faces a serious perception problem due to various reports on corruption.

“Many MNCs are not keen to come in and are willing to spend a little bit more to stay in Singapore while those staying here are those who are already invested here,” he said.

Siva said the “bad publicity” surrounding Malaysia must be addressed or else the country will lose its attractiveness to foreign investors.