Congested development
EARLIER this month, it was reported that two plots of leasehold land totalling almost 19 acres in Bandar Sunway, Petaling Jaya, were up for sale by one-stop logistics solutions provider, Kontena Nasional Bhd.
Details of the land were listed on the company’s website, and also placed in newspaper adverts.
A source familiar with the transaction said the tender of the land had attracted expressions of interest from big players in the likes of Mah Sing Group Bhd, IJM Group, Malaysian Resources Corp Bhd and United Malayan Land Bhd.
The expression of interest by big-name players is a clear sign that developers are actively looking for plots of land to develop in spite of the current property glut.
Checks with property consultants reveal that the plots of land, which are fronting the Federal Highway, have been zoned for commercial purposes.
PPC International Sdn Bhd managing director Datuk Siders Sittampalam says the commercial zoning of the plots of land is in line with the fact that there is a shortage of prime commercial land, especially within the Petaling Jaya district.
“There is a shortage of land. Lots of parcels within Petaling Jaya, especially ranging from five to 10 acres, have been converted into integrated developments,” he tells StarBizWeek.
Kontena Nasional’s two plots of land, measuring 5.399 acres and 13.501 acres, have a leasehold interest for 99 years, expiring on Aug 8, 2103.
VPC Alliance director and chartered surveyor James Wong, who concurs that there is a shortage of prime commercial land in Petaling Jaya, says the plots of land being sold by Kontena Nasional have an estimated market value of RM300 per sq ft.
Siders says two plots of land within the area were transacted at RM386 per sq ft and RM440 per sq ft back in 2014, adding that the land there today may be transacted at around RM450 per sq ft.
“A lot of developments within Petaling Jaya have on them high-density projects because of land scarcity,” he says, adding that many developers are looking for plots of land that can be turned into integrated developments.
“Land prices in Petaling Jaya many years back used to fetch around RM200 per sq ft. Nowadays, it’s difficult to find plots of land with prices like that.”
And with the market slowing down, plenty of developers are looking at more mixed developments that comprise serviced apartments, retail outlets and offices, Siders says.
Redevelopment of Section 13
A part of Petaling Jaya that has been earmarked for transformation is Section 13.
Initially an industrial area, it is slowly being transformed into a mixed-used development enclave, having attracted a number of developers looking to launch mixed-used projects comprising office towers, serviced apartments, hotels and hospitals.
According to Wong, as the local economy and population in Petaling Jaya expand, more commercial land is required to facilitate the needs of the residents there, particularly in the Petaling Jaya South area.
“For example, if you look at the neighbouring locality of Sect 13 from the old plan of the Petaling Jaya City Council (MBPJ), namely Section 16, 17, PJS 11 and PJS 12, 80% to 90% is designated for residential houses.
“If there is no commercial land designated in this area for mixed commercial developments, it is very hard for this area to achieve self-sustainability and maximise the activities for day and night.”
Wong adds that for any thriving residential area, it should be complemented with a vibrant commercial area so that property values will be at its maximum.
“Examples are Bangsar and Bangsar South, whereas an area like Seputeh is handicapped without a thriving commercial area in its midst.”
According to Propwall.my, Sect 13 comprises a total of 78 individual industrial lots, but has recently undergone a transition towards a mixed-development enclave, which has seen several new commercial developments sprouting up. Most of the currently existing industrial lots comprise major corporations such as Dutch Lady, Vitagen, F&N, Colgate-Palmolive, Nissan and Sinchew Jit Poh, to name a few.
“The enclave is deemed by many to be the prime business and corporate district in Petaling Jaya due to its strategic positioning amid many established and thriving neighbourhoods.
“There already are many existing commercial developments such as Jaya One, Jaya 33 and Plaza 33. Some of these developments include residential properties such as small offices home offices or SoHo units and condominiums.”
An added benefit of Sect 13, adds Propwall.my, is its close proximity to a multitude of thriving and established neighbourhoods.
“It is practically surrounded by residential areas, which effectively serves as an employment hinterland as well as a good source of population catchment.
“Sect 52, which is a major hub within Petaling Jaya, is host to many prominent landmarks including Hilton Hotel, Crystal Crown Hotel and Armada Hotel.”
Propwall.my points out that transportation to and fro the enclave of Sect 13 is relatively hassle-free via the multitude of major highways interconnecting commuters.
“The Federal Highway is the closest highway which is about a five-minute drive away, followed by the LDP, the Sprint Highway and NKVE. There are many bus and taxi stands along the roads leading to the enclave, while RapidKL Asia Jaya is about one km away.”
According to the MBPJ Special Area Plan (Rancangan Kawasan Khas, or RKK) for Sect 13, the area covers 252 acres and is served by three major roads – Jalan Universiti, Jalan Kemajuan and Jalan Semangat.
According to reports, the initial MBPJ Local Draft Plan states that if the area was zoned for mixed-use or limited commercial development, serviced apartments and hotels were among developments that were not allowed in Sect 13.
However, the MBPJ soon established that the area would not be able to achieve self-sustainability with only retail and office developments.
In other words, the council has realised that retail space and shop offices alone would not be able to attract quality tenants without residential developments.
According to reports, the MBPJ came up with a Special Area Plan for Sect 13 in Petaling Jaya some years back to facilitate the conversion of land use from industrial to mixed-use or limited commercial.
Under the plan, MBPJ will be converting 189 acres (about 75% of Sect 13) of the existing light industrial land for commercial use.
It will also introduce various measures to ease traffic congestion. Based on reports, depending on the allowable development and land sizes, the permissible plot ratios are 3.25 to 3.75 for mixed-use developments and 2.75 to three for limited commercial development parcels.
Siders points out that a lot of industrial sites within Sect 13 have since been converted into commercial sites - with many more to come.
“Over the last 15 years, Petaling Jaya has turned into an all-new landscape. There are a lot of industrial buildings sitting on ripe commercial-potential land,” he says.
Wong adds that in established industrial areas in Petaling Jaya, many of the factories are closing down due to a labour shortage and are relocating to Shah Alam and Klang.
“This is because a lot of land there are being converted to ‘limited commercial’ and ‘commercial’ use.
Mega-project site
Among the initial developments in Sect 13 that have reaped the benefits of the conversion to commercial developments are Jaya 33 Sdn Bhd’s integrated development Jaya 33 and office development Plaza 33, and Tetap Tiara Sdn Bhd’s Jaya One.
According to reports, Pelaburan Hartanah Bhd bought Jaya 33 for RM324mil or RM725 per sq ft in 2013.
SK Brothers general manager Chan Ai Cheng says Sect 13 has practically become a “super prime area”, given the developments there over the years.
“Following the massive rejuvenation that it has undergone over the years, Section 13 has become a vibrant business centre. So many projects are coming up there – it’s crazy!”
Among the upcoming developments at Sect 13 are Fraser & Neave Holdings Bhd’s (F&N) RM2bil integrated development, Fraser Square, which was initially supposed to kick off in 2016, according to reports.
“The project was held back due to the property market slowdown. However, plans are in place to kickstart the project by either the third or fourth quarter of this year,” says a property consultant.
The project is a joint venture with Singapore-based Frasers Centrepoint Ltd and will be developed on the 12.71 acres where F&N Dairies Malaysia’s manufacturing plant used to be.
Based on reports, the Fraser Square project will comprise three residential blocks, a retail mall with an adjoining hotel and boutique offices, a corporate office building and a block of SoHo.
The first phase – Trilight Residences – will comprise 900 residential units with a total gross development value (GDV) of RM600mil. The second phase, meanwhile, is slated to comprise a mall with the adjoining buildings that will be designed by FCL.
Another project in the works is an integrated development by Paramount Corp Bhd, says Chan.
“The company has parcels of land there,” she says.
Based on reports, Paramount Corp’s unit, Paramount Property Development Sdn Bhd, is looking to develop a RM730mil project on its 5.2-acre parcel located next to Sin Chew Media Corp Bhd in Jalan Universiti.
The project is said to comprise four office towers with a net floor area of 262,000 sq ft, two residential towers with 590 units and about 78,000 sq ft of retail space.
Other ongoing projects within Petaling Jaya are Jaya One and Centrestage in Sect 13; the redevelopment of Atria shopping mall in Damansara Jaya; PJ Sentral Garden City in Seksyen 52; and Jaya 33 in Sect 14.
Incoming supply – boon or bane?
With the number of projects coming in and ongoing, one can’t help but ask about the type of impact it will have on the Petaling Jaya property market.
One industry observer says the incoming retail space will have a negative impact on existing businesses within Petaling Jaya, especially Sect 13, which is already being affected by the current property market slowdown.
“Outlets like Jaya One kicked off well. But it’s struggling now. The surrounding offices or even colleges are a help, but it’s not enough,” he says.
The observer adds that people prefer to spend their days out at large shopping malls with their families.
“Places like Jaya 33, it’s mostly food and beverage (F&B) outlets. But the other sub-segments have been struggling.”
He says malls like Atria and Jaya One have a high concentration of F&B outlets, ranging between 30% and 40% of the total tenant mix.
“For any retail outlet or mall with more than 30% F&B, the mix starts to become less than ideal,” he says, adding that some F&B outlets at Atria have been “turning over.”
“There’s a Vietnamese restaurant upstairs that’s just booming, but the outlets beside it have closed shop.”
Another industry observer notes that while Section 13 is relatively well developed, it could “still do with more numbers.”
“I would consider Sect 13 a light industry, in that you need to have the numbers. It’s mostly office crowds. Unless it picks up, the retail potential there in the medium term does not look so good.”
Axis REIT Managers Bhd head of investments and Malaysian Institute of Estate Agents immediate past-president Siva Shanker believes the additional office space coming in will not have a negative impact on the Petaling Jaya property market.
“I think it will be a case of an overhang situation rather than oversupply. Yes, there will be a lot of space coming in, but I believe that it will be taken up – eventually.”
Siva says take-ups will likely be slow in the near term due to the slowdown in the current property market.
“But once the economy picks up and business improves, there will be an upturn and the space will be filled up. The market picking up and coming down, it’s a natural progression. Whatever cycle it is in now (downturn or upturn), it doesn’t last forever.”
He adds that the amount of incoming office space in Petaling Jaya is nowhere near as high as that coming into Kuala Lumpur city.
“I think for those opening up new offices, it would be unreasonable to expect full take-up rates within a week. Perhaps within a few months.
“Also, many companies are not afraid of moving further away from the city and into the suburbs today because it’s less congested. If you look at places like Bangsar South, it’s been a success.”
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