PETALING JAYA (May 20): Capital values in Kuala Lumpur’s office market increased some 6% despite weaker rental rates that put yields under pressure, said analyst firm DTZ Research.

In its report, “Property Times Kuala Lumpur Q1 2015: Cautious Sentiment Aggravates Uncertainties”, it said the weak oil and gas sector that has traditionally driven office demand is expected to significantly affect the market in the short to medium term, while diversifying to other high-value service sectors will be challenging.

The impending office supply has been a concern to the market since last year, said DTZ. Menara Centara was the only office block completed in 1Q2015, with 200,000 sq ft of net lettable area. However, 2Q2015 is expected to see close to three million sq ft of new office space with the completion of Naza Tower, Q Sentral and Summer Suites.

This year, some six million sq ft of completions are expected. Rental rates are likely to stagnate as the market awaits the incoming supply.

Meanwhile, overall take-up for the period was 208,000 sq ft, with minimal change in the vacancy rate. Total office supply currently stands at 72.5 million sq ft while total occupied space is estimated at around 60.2 million sq ft.

Also recorded during the period were office building transactions that included Quill 10 in Section 13, Petaling Jaya (RM27.3 million), and Plaza Pekeliling on Jalan Tun Razak (RM28.28 million), which will  be converted to a SoHo development.

Retail therapy

In the retail sector, the report stated that more shopping malls will be built despite the slower growth of retail sales as consumers adapt to the introduction of the Goods and Services Tax. The sector remained resilient despite a marginal decline in occupancy by 1% to 90.3%.

DTZ noted that retail stock in Kuala Lumpur stands at 24.45 million sq ft, with some 1.27 million sq ft more of retail space expected to be completed this year.

The new malls that will be built in the Klang Valley over the next three years are Sunway Putra Place (620,000 sq ft of net lettable area), Sunway Velocity (1 million sq ft), Atria Shopping Mall (450,000 sq ft), AEON Shah Alam (500,000 sq ft) and The Two @ Rawang (1.35 million sq ft).

Also being built are a 1.2 million sq ft mall in the BBCC project, which is UDA Holdings’ joint-venture redevelopment of Bukit Bintang Plaza with Tradewinds International Sdn Bhd; a new mall at the Tun Razak Exchange with a potential gross development value of over RM8 billion; and the redevelopment of Cheras Velodrome by textile merchant-turned-developer Jakel Development Sdn Bhd.

The four-storey Tropicana City Mall and 12-storey Tropicana City Office Tower have been acquired by CapitaMall Malaysia Trust for RM540 million, the report states.

Meanwhile, some malls are being rebranded and repositioned. The SSTwo Mall, which has not been trading well since its completion, is being rebranded and scaled down by its owner AsiaMalls Sdn Bhd.

The quarter under review also saw the refurbishment of CapSquare after its acquisition from Bandar Raya Developments Bhd in 2012 and the entry of Jakel Mall with 330,000 sq ft of retail space. 

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