Consider REITs as alternative in property investment

As work-from-home becomes a new norm, it is expected that demand for physical office spaces will be reduced. However, industry veterans reckoned that commercial properties still have their investment value, depending on their location and pricing.

MKH Bhd group managing director and Perbadanan PR1MA (PR1MA) Malaysia chairman Tan Sri Eddy Chen said while these properties may not be doing well in the near term due to the weak economic conditions and evolving needs, commercial properties continue to serve their purpose in the long term.

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“Do expect the market for the commercial segment to remain soft for another one or two years, but people with money and means will still be looking for good bargains in the market,” he said.

Real Estate and Housing Developers’ Association (Rehda) president Datuk Soam Heng Choon  noted that the usage and interest for investment properties, including commercial and industrial will decline in the mid-term as people’s immediate priority is to conserve cash and not to channel money into property investment.

Having said so, he added that buyers who are eyeing “a good catch” should take this opportunity to buy from owners who are cashing out, provided that the property is in a good location and the buyer has the risk appetite for it.

Meanwhile, Rehda Institute chairman and president of the Malaysian REIT Managers Association Datuk Jeffrey Ng suggested that investors who are interested in commercial properties but afraid of the high risk should consider investing in real estate investment trusts (REITs).

“Leave the headache to professional REIT managers as they know what they are doing,” he said.

“Even with the gloomy market due to the Covid-19 outbreak, there are certain ‘sunrise businesses’ that investors should look at — healthcare, e-commerce and education.

“These blooming industries will be the next drive for the property market but it’s not viable for individuals or companies to buy these big-ticket items, hence investing in REITs will be a better way,” Ng added.

The industry veterans shared these views during the Facebook Live Fireside Chat titled "Will the Malaysian Property Sector Survive this Mother of All Crises?” on April 17. The session was moderated by EdgeProp Malaysia managing director and editor-in-chief Au Foong Yee.

Au surmised that investing in commercial properties is no different from residential properties. “Be discerning about the location and other attributes of the property. Likewise, for REITs, one must be discerning about the selection as well. A lot of malls are also going through a very hard time right now. Investors must be very, very cautious,” she said.

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This story first appeared in the pullout on April 24, 2020. You can access back issues here.

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