DTZ report shows slow 1Q
KUALA LUMPUR: Cautious sentiments arising from expectations of an economic slowdown have led to a generally subdued property market in Kuala Lumpur. According to real estate consultancy DTZ Malaysia, the situation is not likely to abate soon and most sectors will likely face a challenging year.
However, implementation of mega transport infrastructure projects such as the mass rapid transit and the light rail transit extension lines as well as mega projects such as the Kuala Lumpur International Financial District, Bandar Malaysia and the 100-storey Menara Warisan Merdeka is expected to cushion the looming economic slowdown, said Brian Koh, executive director of DTZ Research.
The DTZ Property Times Kuala Lumpur 1Q2012 market report showed occupancy rates for offices have improved slightly to 86% compared with 85.8% in the previous quarter. Capital and rental values remained firm but are likely to face downward pressure in view of the overall slowdown in the economy and office space oversupply.
“The market will see more competitive pressure on rents with pending completions as well as planned projects such as the Kuala Lumpur International Financial District which could rival offices in KLCC,” said Koh.
Currently the total supply of office space in Kuala Lumpur is 64.6 million sq ft. The city is set to see a 19% jump in the next three years with an estimated 4.8 million sq ft of new office space to be completed by year-end.
Steps by Multimedia Development Corp, the regulatory authority for the multimedia industry, to liberalise guidelines for MSC status companies to be located within areas designated as “Cybercities” without necessarily being a specific MSC-designated building have given prospective tenants more flexibility while helping landlords to derive cost savings on capex, said Koh.
Meanwhile, the residential market has been relatively quiet following stricter lending guidelines imposed by Bank Negara Malaysia. The move has taken a bite of the demand (especially speculative buying) and cooled a residential market that has run up substantially in terms of pricing over the last two years, leading developers to focus on the more affordable housing segment.
Eddy Wong, executive director and head of residential marketing, said: “Developers are now focusing on smaller (and affordable) units, and at the same time, leveraging on the Developer Interest Bearing Scheme (DIBS) to attract buyers.”
Average capital value of high-end condo in Kuala Lumpur increased marginally by 0.5% q-o-q to RM634 psf while average rental value rose 3.1% q-o-q to RM3.62 psf per month.
In addition, the retail sector is anticipated to grow slower at 6% in 2012, down from 6.5% in 2011 due to more cautious consumer spending, job uncertainties and an anticipated tightening of credit card spending.
A slight decline in occupancy rates in most shopping centres in Kuala Lumpur prompted DTZ to conclude that it will be a challenge to keep occupancy rates up in the near future due to the pipeline supply of retail space and the sluggish global economy. They predict that upcoming major retail centres slated to enter the market and malls with high footfalls will continue to attract selective retailers.
Funding for projects and borrowers is still available as liquidity remains ample while the forecast growth for 2012 is 4% to 5% compared with the 5.1% growth a year ago.
Investment activities have experienced a slow start despite strong interest and increase in enquiries from foreign investors, with volume dropping to RM427.5 million in 1Q12 from RM530 million. However, this is expected to change later in the year as proposed REIT listings are in the pipeline which will spur investments from foreign funds.
By The Edge
Source : http://www.theedgemalaysia.com/property/212863-dtz-report-shows-slow-1q.html