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KUALA LUMPUR: Prime office buildings in Kuala Lumpur recorded better occupancy rates but the office market is expected to remain soft in general due to substantial pipeline supply.
According to the KL Property Times Q12011 Report by property consultancy DTZ, the overall occupancy rate of office buildings in KL increased slightly from 86.4% in Q42010 to 86.9% in Q12011 due to good take-ups at prime office buildings.
A new prime office building, Hampshire Place added 240,000 sq ft to existing stock in 1Q while from 2011 to 2014 another 13.2 million sq ft of new office space is expected to be available in the market, hence the office sector is expected to be soft in favor of tenants.
Average prime office monthly rents remained stable with minimal upward change at RM6.12 psf in Q1 2011, thanks to the better occupancy achieved in some prime office buildings.
Meanwhile, response to strata-titled office launches in 1Q2011 was strong including the Q Sentral building at KL Sentral which was soft launched at an indicative price of RM1,400 psf. It also noted strong preview sales at S P Setia’s KL Eco City.
DTZ Nawawi Tie Leung Property Consultants Sdn Bhd Executive Director of Consulting & Research, Brian Koh, said the stratified offices are seeing good sales due to a built-up of latent demand over the last few years. “This is a bright spot for the office market,” he said.
The retail market is expected to see mixed performance due to rising inflation despite strong consumer sentiments. The research house said 2010 has seen a sales growth of 8.4%, while the occupancy of prime shopping centres remains high at an average 87% in Q12011 with stable rental rates.
In the residential market, Koh said buying sentiment remains optimistic but with caution setting in due to affordability. The prime condominium market would remain active with new launches planned for the remainder of the year.
The report noted the encouraging take-up at a few new high-end condo launches such as The Capers by YTL Land and Development in Sentul which set a new benchmark price in the area.
“Although this indicates a positive buying sentiment, affordability seems to be declining,” the report said.
The average price of high-end condominiums in KL was stable at RM603 psf in 1Q2011, while average rents declined marginally to RM3.55 psf from RM3.58 psf the previous quarter.
DTZ Head of Residential Marketing, Eddy Wong said demand continues to be relatively selective with some concerns over difficulties in leasing for new completions.
The property house noted that investment deals in 1Q2011 were similar to the previous quarter, involving approximately RM1.36 billion from some five assets, including the proposed acquisition of The Gardens Mall at Mid Valley City as well as Tenaga Nasional Berhad’s proposed acquisition of Oilcorp’s Amanah Tower at KL Sentral for its own occupation.
Nevertheless, the outlook for the rest of the year is cautiously optimistic being driven by domestic investments under the Economic Transformation Programme (ETP).
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