Occupancy, rents trending downwards in KL
New supply of office space continues to negatively impact the overall
“We may see a decline of about 5% to 10% in both occupancy and rental rates this year, considering the expected high rate of completions,” says Sarkunan Subramaniam, executive director of Knight Frank Malaysia, when presenting The Edge/Knight Frank Klang Valley Office Monitor for 1Q2011.
Sarkunan estimates an inflow of more than two million sq ft of net lettable area (NLA) in the city and more than 1.8 million sq ft of NLA in the city’s fringes this year, which will bring the supply in the city to more than 46 million sq ft and that in the city’s fringes to more than 17 million sq ft.
The two latest completions are Hampshire Place Office (NLA: 219,000 sq ft) in 1Q2011 and
“We expected the decline, particularly in occupancy, in 1Q2011 as the new offices are taking some time to be leased out,” says Sarkunan.
Sarkunan notes that both buildings are still in the negotiation phase with tenants and that units with concluded leases are generally in the fitting-out stage.
Hampshire is marketed as a Prime B building with an asking rent of RM5.50 psf while CapSquare is marketed as a Prime building located in the centre of the CBD with an asking rent of RM5 to RM6 psf.
Nevertheless, Sarkunan believes that government initiatives, if implemented successfully, augur well for the office market as these would help cushion the impact of a high impending supply and improve the overall absorption rate of such space, both in the city and its fringes.
One of the key initiatives — attracting 100 multinationals to establish their global or regional headquarters in the
Sarkunan notes that Schlumberger Ltd, one of the world’s leading oilfield services companies, opened its financial hub and regional headquarters at 1 First Avenue in Bandar Utama in November last year.
Schlumberger occupies three floors with a NLA of 82,160 sq ft.
“We also understand that the newly licensed Industrial and Commercial Bank of
Google has set up an office — its second in
Sarkunan says Google’s presence will indirectly spur growth in the office market in the medium to long term.
Meanwhile, selected offices in the city’s fringes, including Petaling Jaya, continue to enjoy high occupancy rates unlike those in the city.
Some of the popular offices are One Sentral, Quill Building 7, Menara Millenium, The Gardens South Tower, Menara IGB, Menara UOA Bangsar,
“Well-located office buildings in integrated developments as well as those accredited as green buildings, have MSC status and are located near monorail or light rail transit stations are expected to continue to perform well in line with the preferences of today’s office tenants,” says Sarkunan.
The monitor’s samples show overall average rents declined just 0.2% q-o-q in 1Q2011.
The Golden Triangle registered a drop of 4.8% to RM5.56 psf during the period, while offices in the CBD increased 2.3% to RM4.02 psf. Offices in
Overall, the occupancy rate saw its sharpest drop in over a year, down 7.7% q-o-q to an average 84%.
Occupancy in the CBD dropped 11.6% q-o-q to 84% — the biggest decline among the three areas. The Golden Triangle recorded 84% occupancy as well, down 9.7% q-o-q, while Damansara Heights saw an improvement — up 1.1% q-o-q to 89%.
Sarkunan notes that one of the sample buildings in
“The decline in the occupancy rate of the Golden Triangle and the CDB is attributed to new supply in the market,” he explains.
Knight Frank has expanded the basket of selected office buildings by adding newly completed buildings and other office buildings which are available for leasing in the market.
An active quarter
A few launches, transactions and developments kicked off in 2011.
In 1Q2011, Sunway City Bhd launched its latest integrated mixed-use development —Sunway Nexis — located in Dataran Sunway, Petaling Jaya.
Sunway Nexis comprises a 3-storey retail podium with a 13-storey tower of office suites and a 20-storey flexi office block sitting atop the podium block. The suites are 925 to 1,722 sq ft in size while units in the flexi office block range from 850 to 1,980 sq ft.
In Kota Damansara, Mitraland Group launched office units in The Cascades. The mixed-use development offers built-ups of 696 to 1,565 sq ft with prices from RM453,100 onwards.
Meanwhile, S P Setia Bhd’s launch of the first phase of KL Eco City may be in 2Q2011. Phase 1 of the development will comprise one block of high-rise offices and 12 blocks of boutique offices. The site is adjacent to the decentralised office location of Mid Valley City.
AQRS The Building Company Sdn Bhd will be launching its Green Building Index (GBI)-certified mixed-use development called the Altium in Damansara Perdana in the next quarter.
The development comprises a 30-storey Grade A office tower with a gross lettable area (GLA) of 300,000 sq ft called The Prime, a 10-storey Grade A block of
On the development front, Tradewinds Corp Bhd plans to demolish Crowne Plaza Mutiara Hotel and Kompleks Antarabangsa, both located in Jalan Sultan Ismail, and transform them into a “multi-billion ringgit” mixed-use commercial development comprising office, retail and residential components. The plan is in the advanced concept stage and the development order for the site plan has been approved.
Point 92 in Damansara Perdana, a 12-storey office building with a net built-up area of 159,000 sq ft, is another commercial development by Tujuan Gemilang Sdn Bhd (the developer of PJ Trade Centre in Damansara Perdana). The developer is looking to obtain GBI certification for Point 92.
The leasehold project with an indicative gross development value (GDV) of RM95 million is expected to be completed by June 2012. The developer is now in talks with several parties for the en-bloc sale of the building.
A 42-storey office building known as Q Sentral by Cosy Bonanza Sdn Bhd, a joint venture between MRCB and Quill Sentral Sdn Bhd, is under construction on a 1.85-acre site known as Lot B, KL Sentral.
The selling prices of the Grade A offices (297 in total) range from RM1,190 to RM1,500 psf. The offices had reached a sales rate of about 50% (circa RM600 million) prior to their launch on Jan 8. The building, which is scheduled for completion in 2014, is aiming for GBI and MSC certification.
The review period also saw a few notable transactions. Tenaga Nasional Bhd is teaming up with Magic Coast Sdn Bhd to buy a 33-storey corporate tower with common facilities and 460 parking bays, which forms part of the mixed-use development Dua Sentral, for RM232 million.
Daya Urusharta Sdn Bhd, a wholly-owned subsidiary of Daya Material Bhd, and Koperasi Permodalan Felda Malaysia Bhd have proposed the acquisition of five office suites in Solaris Dutamas for RM2.75 million.
In late January, SBC Corp Bhd announced its intentions to dispose of the 33-storey PJX Commercial Space for RM7.13 million.
The quarter under review also saw a notable leasing transaction at 1 Mont’Kiara with ServiceSource International Malaysia Sdn Bhd taking up a net lettable area of approximately 23,600 sq ft. Knight Frank Malaysia concluded the transaction.
This article appeared in City & Country, the property pullout of The Edge Malaysia, Issue 856, May 2-8, 2011.
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