Siva ShankerKUALA LUMPUR (Nov 1): The occupancy rate of offices in Kuala Lumpur city has fallen to 83% from nearly 90% in 2H2015.

A 7% drop in occupancy rate may seem small, but to the industry, it is bad news, said Axis REIT Managers Bhd head of investment Siva Shanker.

“KL’s office occupancy rate has always been holding up at 87% to 90%, but we hit 83% this year. And the bad news is, we expect it to go down further next year,” said Siva during  his presentation on “Office market trends and review” at “The Malaysian Property Market: Opportunities amidst uncertainties” forum organised by Rahim & Co today.

As at 3Q2016, office space supply numbers are “very high” with current purpose-built office space in Kuala Lumpur and Selangor standing at 92.7 million sq ft, said Siva.

“There is more supply to come. A further 5.8 million sq ft will come into the market, such as from new office buildings Public Mutual Tower, JKG Tower @ KL City, Menara Ken @ TTDI, Menara Hong Leong and etc,” he added.

Despite the fact that office space supply in the Klang Valley is rising in an already stagnant office market, some landlords may think of reducing rentals to attract tenants.

However, Siva said rent reduction may not be the answer to the current soft office property market.

Hence he said although it is a tenants’ market now, owners shouldn’t cut down rental to attract tenant.

“Unlike residential property, once you adjust your rent, you can never go back. Imagine when you collect less rent, you will have less funds to maintain your space, hence you will continue to attract the same quality of tenants. Unless you are rich and willing to fork out funds to maintain the building maintenance standard, it is difficult to come back to the higher level when the market improves,” he stressed.

“Although things look bad now but it won’t be like that forever. Everything is a cycle. In 2017, the market should begin to level out and start moving upwards again in 2018/2019 while in 2020/2021, we will see the market peaking again,” he shared.  

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