News: Malaysia’s Office Space Oversupply Woes Worsens

Aug 13, 2019

The glut in office space within the Klang Valley has continued to grow, with vacancy rates increasing to 23.5 percent in the first quarter of 2019, from 22.6 percent over the same period last year. 

According to the Valuation and Property Services Department (JPPH), Putrajaya’s vacancy rate hit a record high of 57.6 percent in Q1 2019.

JPPH director-general Ahmad Zailan Azizuddin observed that most private sector companies that want to have their base in the region’s administrative areas, preferred Cyberjaya over Putrajaya, as the former is seen as “more conducive” for the conduct of business, reported The Star.

Read more: How to buy a subsale property in Malaysia 

“Cyberjaya provides a better alternative for business since it has the advantage in terms of lower rents and better business networking,” he said.

He explained that the 23.5 percent rate was equivalent to 41.66 million sq ft of unoccupied space.

“Kuala Lumpur and Selangor were the highest in terms of unoccupied space at 19.27 million sq ft and 11.19 million sq ft respectively. Our focus has always been to be watchful and prudent in allowing future commercial development such as office and retail.”

“There will be more than 21.53 million sq ft of office space in the pipeline and upon completion, it will inject another 12 percent to the current existing space.”

Foo Gee Jen, CBRE|WTW managing director, said the Klang Valley’s office sector is currently burdened by the pressure on the rental rate.

“Recently, developers have raised their concerns over labour shortage problem and increase in cement price. Fearing another round of price increase, there were reports of reconciliation efforts from the government, but it remains to be seen if the fire has indeed been put off.”

“In view of the current market condition, there could be opportunistic buying and selling of assets. Also, there could be acquisition opportunities for industrial properties in commercialised areas with use conversion potential.”

Meanwhile, Knight Frank Malaysia said the oversupply and low absorption goes on to impact Klang Valley’s office market, with occupancy and rental levels seen to be holding firm in Selangor and the KL fringe.

“The availability of good grade office supply at competitive rentals and the expanding public rail transit lines have boosted the popularity of decentralised office locations,” it said.

Based on Savills’ Greater KL Office Market Overview First Quarter 2019 report, Asean’s largest office space supply is in Greater Kuala Lumpur, at 126 million sq ft.

In comparison, Bangkok has 97 million sq ft of office space, Singapore 80 million sq ft, Jakarta 67 million sq ft and Manila 73 million sq ft, according to Knight Frank’s report.

 

Image source from Edge Prop

 

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Keith Ng
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Prestige Realty
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