Govt urged to review incentives for office space

KUALA LUMPUR: The government should reassess the incentives available for office occupants in view of the high supply and low take-up rate of office space in Greater Kuala Lumpur.

“At the moment, we have two types of incentives for office occupants. We’ve got MSC incentives and we’ve got those incentives that are specific to TRX,” said Savills Malaysia executive chairman Datuk Christopher Boyd ( pix).

With the high amount of office space available, he suggested that the government provide incentives that would encourage occupants to move into new buildings with better facilities.

“Perhaps also combine that with incentives for employing fresh graduates,” Boyd said at the Sales and Marketing Conference organised by Rehda Institute yesterday.

Boyd said it may be time to scrap the MSC incentives, which are about 20 years old now and has served their purpose.

He added that most people have lost sight of the original intention of the MSC incentives, which have become an approximate of office building quality in the absence of other types of grading of buildings in Malaysia.

In addition, many occupants of MSC buildings today no longer take full advantage of the incentives provided.

MSC Malaysia status is awarded to local and foreign companies that develop or use multimedia technologies to produce or enhance their products and services. “Now we have TRX incentives and I think in view of the fact that we have quite a lot of office space to move, it’s probably high time for the government to reassess these incentives,” Boyd said.

According to data from Savills Research & Consultancy, office supply in Greater KL grew from 3.6 million square feet (sq ft) in 2016 to 5.5 million sq ft in 2017 and is expected to increase to 6.2 million sq ft this year.

Meanwhile, the absorption of office supply was only at 1.4 million sq ft in 2016, rising to 1.9 million sq ft last year. The takeup rate is expected to remain flat at 1.9 million sq ft per year from 2018 till 2020.

Boyd said the general oversupply in the office sector has kept rental rates low, which have been keeping pace with inflation.