As new office towers and commercial squares continue to sprout up across Klang Valley and other parts of Malaysia. However, many people inevitably wonder if there is indeed such strong demand in the market to warrant these new development and what the rapid increase in supply would mean for the market.
Vision 2020 has long outlined Malaysia’s aim to become a development nation by 2020 and with the deadline drawing ever closer, the government has sped up its effort to attract foreign investments as well as to develop Malaysia as the region’s economic and trade center.
The push has prompted many developers to increase the supply of office and commercial properties, but some investors are lamenting the inflated price and subsequently low yield.
Latest figures from the National Property Information Center (NAPIC) show that residential properties still top the sales charts. On the other hand, sales of office spaces has been decreasing year on year with some developments seeing take up rate as low as 50%.
However, the lackluster demand is not uniform across the board and Grade A offices within Kuala Lumpur’s Golden triangle continues to be strong. In fact the occupancy rate has remained high for these Grade A office at around 87%.
Research findings from CB Richard Ellis (CBRE) pointed that rental, location, facilities, and services are key considerations where making decisions and the completion of many new buildings has opened up more choices for enterprises.
Klang Valley currently has some 86.5 million sq ft of office space as compared to 85.7 million sq ft in the Q1 this year. The increase of 6.3million sq ft represent some 8% increase in office spaces. Some 5.4 million sq ft will be added to the market before the end of 2012 and this will lead to stiffer competition and will exert downward pressure on rental yield.
The increase in supply is expected to slow down after 2012 and would not be expected to increase till 2014