Brighter outlook with growing economy

KUALA LUMPUR: Office rental rates continued to drop marginally in 2Q2010, caused by a significant incoming supply of 2.06 million sq ft by the year's end, according to DTZ Research Report 2Q2010 published on July 13.

The report added that rental rates also dropped because the office market experienced more active enquiries and a higher take-up of space, as seen by the improvement in net absorption rate.

The average prime office rent rate fell marginally from RM6.02 psf per month in 1Q2010 to RM6 psf per month in 2Q2010.

“It is increasingly a tenant’s market, with ability to negotiate for cheaper rates due to substantial incoming supply in the next few years. About 14.9 million sq ft of purpose-built office buildings are in the pipeline between 2010 and 2014,” the statement said.

The overall occupancy rate of office buildings rose slightly from 87.2% in 1Q2010 to 87.9% in 2Q2010.

Meanwhile, the outlook of the retail sector remains competitive, with an upcoming supply of 2 million sq ft due in 2010. The overall average occupancy rate of shopping centres in Kuala Lumpur remained at 91% in 2Q2010.

According to the report, while occupancy is expected to fall, rental rates will remain stable with some marginal upside of between 3% and 5% by prime retail centres. The future outlook of the retail sector depends on the 10th Malaysia Plan (10MP), which had projected private sector consumption to grow by 7.7%, from the average of 6.5% per annum in the preceding five-year period.

The investment market rebounded strongly, driven mainly by Real Estate Investment Trusts (REITs) through restructuring and injecting properties into their current portfolios. The total transaction involved was reported to be RM1.7 billion.

The report said the proposed listing of a few REITs would make the domestic REIT market more attractive investors.

“The recent announcements on the New Economic Model (NEM) and 10MP will have a strong bearing in the future direction of the country and its impact on the property sector,” said DTZ executive director of consulting and research Brian Koh.

Meanwhile, demand for luxury residential landed properties was overwhelming, with strong take-ups of recent launches in Klang Valley. One example is Desa Park City’s Casaman -- comprising 147 units of 2- and 3-storey homes priced between RM1.75 million and RM2.14 million respectively -- which was sold out within five hours. Faber Group’s Armada Villa in Taman Danau Desa, comprising 40 semi-detached houses and six bungalows, was launched in early-April and by May had recorded 70% sales.

Average prices of high-end condominiums in Kuala Lumpur fell 3% quarter-on-quarter to RM552 psf in 2Q2010, while average rent rates dropped marginally to RM3.53 psf in the same quarter. High-end condominiums in the city centre continue to face a concern of over-supply and decline in number of expatriates, which in turn triggered the decrease in both capital and rental value.

“The recent hike in Overnight Policy Rate (OPR) does not have much adverse effect on property market especially in the high end residential properties. Generally, the buying sentiment has improved following the robust growth experienced in 1Q2010,” DTZ head of residential Eddy Wong.
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