Prop­erty up­trend to re­sume only in 2018/19

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

The Sun (Malaysia) - - SUNBIZ - BY EVA YEONG

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.

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