indepth

Buoyant Brickfields

The landscape of Kuala Lumpur’s Brickfields neighbourhood has evolved dramatically since Malaysian Resources Corp Bhd (MRCB) first planned to build the 72-acre transit-oriented and integrated development KL Sentral in the area in 1996. The completion of its initial first few phases in early 2000 spurred property values in the area where previously, time had stood still. Today, on one side of its arterial road Jalan Tun Sambanthan, lies Little India with its charming old shops, medium-cost apartments and old government housing quarters, while on the other side is KL Sentral with its gleaming high-rise offices, hotels, residences and even a mall.  Certainly, Brickfields today is a study in contrasts.

Rapid development over the years has seen it become an extension of Kuala Lumpur city centre, especially with the easy connectivity of its light rail and monorail lines. According to a report in The Edge Malaysia business weekly, among the upcoming projects here is a RM2 billion commercial development on the parcel of land where the former district police headquarters and barracks were located. Meanwhile, the century-old 100 Quarters along Jalan Chan Ah Tong, Lorong Chan Ah Tong and Jalan Rozario may be redeveloped into a three-tower 40-storey condominium development if the project is approved.

Prices on the rise

Brickfields has the benefit of being just a hop, skip, and jump away from Kuala Lumpur city centre but the jewel in its crown is KL Sentral, the main transportation hub of the Klang Valley.  With such great connectivity, it is no wonder property values in this part of Brickfields are hitting record prices. 

In an analysis by theedgeproperty.com of transactions of non-landed residential property in Brickfields (including KL Sentral), it was found that average values rose by 25% in the third quarter of last year (3Q2014) from a year ago to RM762 psf. This could be due to the lack of transactions of older apartments in the area during that period. However, these older apartments, some more than 30 years old, are also recording strong price growth. 

While the highest average price growth during that period was set by Suasana Sentral at 37.2% or RM989 psf, across the road, one of the older apartment blocks Palm Court, came in second with an average price growth of 19.7% to RM486 psf. (See Chart 2)

According to Savills Malaysia associate director Nabeel Hussain (pictured, left), residential units in Palm Court and The Pines (another old condominium project) were sold at an average RM266 psf and RM295 psf respectively in 2010. Last year, their average transacted value was close to RM500 psf and RM597 psf respectively which translates to a growth of 88% and 102% respectively over a period of five years.

For newer condominiums such as 633 Residency, the average transacted price rose 23% from RM570 psf in 2010 to RM700 psf last year.

Meanwhile, newer high-end condominiums in KL Sentral such as Suasana Sentral Loft and Suasana Sentral, which recorded an average transacted value of RM680 psf and RM520 psf respectively in 2010, were sold at RM1,000 psf and RM870 psf respectively last year, according to Savills Malaysia data.

Rental boost

The booming residential values in Brickfields could be due to the strong rental market. Demand in the residential rental market has led to rents rising. The number of expatriates in Brickfields’ Little India, is also growing. Many are professionals from India who are software engineers working in sectors such as finance, oil and gas, and IT as well as in local government vendor companies, according to Brickfields property investor Chandra L Ramprakash (pictured, right).

Also, with the noise and traffic congestion in the area, the residential market here tends to be rather investment-driven, says Nabeel.

While the average monthly rental for non-landed residences in Kuala Lumpur is around RM3,492 or RM2.50 psf, that of the Brickfields and KL Sentral area is RM4,699 or RM3.52 psf, according to research by theedgeproperty.com.

Average monthly rents for condominiums in KL Sentral are between RM5,000 and RM5,500, as observed by theedgeproperty.com in February this year. For instance, Suasana Sentral and Suasana Sentral Loft offer average monthly rents of RM5,581 (RM3.10 psf) and RM5,106 (RM3.74 psf).

Current rents for the rest of Brickfields average between RM1,500 to RM3,800. A newer condominium such as 633 Residency commands an average monthly rental of RM3,668 or RM2.85 psf, while much older condominiums such as Palm Court and The Pines record an average monthly rental of RM2,500 (RM2.44 psf) and RM2,800 (RM2.15 psf) respectively.

According to Zerin Properties Sdn Bhd CEO Previndran Singhe (pictured, below), five years ago, average rents in Brickfields were between RM1,300 and RM1,800, while rental yields were between 5% to 6%. He estimates the current market still gives similar rental yields.

Outlook

As Brickfields has a transport hub and is in close proximity to the city centre, Previndran believes the residential market in Brickfields will continue to perform well.

Nabeel stresses that the residential market in Brickfields is and will continue to be mostly investment-driven as it enjoys a stable demand from the rental market.

Some upcoming residential developments to watch out for in the area include the St Regis Hotel and Residences (by MRCB and CMY Capital), the Sentral Residences (by MRCB and Quill Group) and The Establishment (by Keystone Land Developments Sdn Bhd). The Sentral Residences and the St Regis Hotel and Residences are located on the northern side of KL Sentral, while The Establishment is located on Jalan Ang Seng and Jalan Ang Seng 3 in Brickfields. The St Regis Hotel and Residences is scheduled for completion at the end of this year, the Sentral Residences by mid-2016 and The Establishment by 2017.

Previndran notes that what land remains for development are pocket-sized freehold plots of about 5,000 to 10,000 sq ft and mostly owner-occupied with residential and commercial use status. They go for RM800 psf to RM1,200 psf.

From bricks to Brickfields

In its early days, Brickfields was known as the 15th mile as it was 15 miles from the Klang River and the marker, located near the now defunct Lido Cinema near YMCA, helped travellers track their journeys.

When fire and floods swept through Kuala Lumpur in 1881, destroying the wood and attap structures in the district, British Resident of Selangor Frank Swettenham required that bricks be used for buildings instead.

This prompted the third and longest-serving Chinese Kapitan Yap Ah Loy, one of the founding fathers of Kuala Lumpur, to buy a piece of land to set up a brick-making industry for the rebuilding of the city. That site was later named Brickfields.

Brickfields was later developed by the fifth and last Chinese Kapitan Yap Kwan Seng, who foresaw an increased demand for bricks in the fast-growing Kuala Lumpur, and established a kiln in the area. Brickfields became the centre for brick-making and synonymous with good quality bricks.

As one of the pioneer settlements in KL, Brickfields was also the main depot for the Keretapi Tanah Melayu (Malayan Railway).

Growth in commercial and retail spaces

The Brickfields/KL Sentral area saw an increase in office and retail space after the recent completions of Menara CIMB, Menara Shell, Nu Towers (by MRCB and ASEANA Properties Ltd (UK)), Nu Sentral Mall and 1Sentrum (both by Pelaburan Hartanah Bhd and MRCB), Sentral Vista (by Masteron Group of Companies) and Menara Bank Rakyat. All are located at KL Sentral except for Sentral Vista and Menara Bank Rakyat, which are located on Jalan Sultan Abdul Samad and Jalan Rakyat (previously known as Jalan Travers), respectively.

Savills Malaysia associate director Nabeel Hussain says the new commercial developments in KL Sentral have driven up the value of commercial properties in the rest of Brickfields, and that commercial property values and rents have been increasing as investors see the area’s potential.

The new office buildings within KL Sentral are high-rise Grade A, MSC-status buildings that come with modern architecture, facilities and security features. These offices cater for both local companies and multinational corporations.

In contrast, the old two-storey and 4½-storey shops in Brickfields are mainly operated by local businesses that cater for the Indian community such as budget hotels, restaurants, banks, boutiques, hair salons, clinics, jewellery shops and convenience shops. These shops, mostly built between the 1920s and 1980s, have typical built-ups of about 2,100 to 4,000 sq ft for the 2-storey ones, while the 4 ½ -storey shops are between 7,460 sq ft to 9,000 sq ft.

Nabeel says monthly rents for the 2-storey shops increased from RM11,500 per month in 2010 to RM25,000 last year, while rents for the 4-storey shops rose from RM15,000 to RM35,000.

As for the in-demand ground floor shops, Zerin Properties Sdn Bhd CEO Previndran Singhe notes that the current rent is RM15,000, an increase from RM10,000 in 2010.

Selling prices of the older shophouses and shop offices are dependent on their street location. The 4 1/2-storey shopoffices on Jalan Tun Sambanthan 3 and Jalan Scott were sold for RM2.3 million and RM2.5 million in 2010 respectively, according to Nabeel. Last year, these shop offices were transacted at RM4.6 million and RM3.7 million respectively, recording 100% and 48% growth respectively. Meanwhile, 4 1/2-storey shop offices along Jalan Tun Sambanthan were sold for RM3.6 million in 2010, and at RM6.6 million last year, recording an 83% increase, he notes. As for the 2-storey shophouse along Jalan Sultan Abdul Samad, their 2010 transacted value of RM1 million rose to RM1.3 million last year, an increase of 30%.

As rents are strong for these shops, owners are holding on to them and offering one-year leases, according to property investor Chandra L Ramprakash.

As for offices in KL Sentral, Nabeel notes that rents have not changed much over the past five years, and average between RM6 and RM8.50 psf. Meanwhile, Previndran says retail space in office buildings is currently between RM8 to RM10 psf while retail space in the recently completed Nu Sentral Mall range between RM15 and RM25 psf.

Previndran says current prices of KL Sentral offices range between RM1,000 and RM1,600 psf compared with RM950 psf in 2010. He notes that offices in Plaza Sentral are currently priced at RM1,000 psf whereas for Q Sentral (by MRCB and Quill Group), which is nearing completion, the asking price is between RM1,500 and RM1,600 psf. Q Sentral is estimated to be completed by 2Q2015.

With all that is taking place in this area, only time will tell how much the Little India of KL will transform further in years to come.

This article first appeared in The Edge Property, the property pullout of The Edge Financial Daily, on May 15, 2015. Get the full pullout here and view video here. For a quick and brief analysis of the property market in Brickfields:
PROPERTY SNAPSHOT Brickfields prices hit new high
PROPERTY SNAPSHOT What’s affordable in Brickfields?
PROPERTY SNAPSHOT What are developments priced in Brickfields?
PROPERTY SNAPSHOT What’s hot in Brickfields?

 

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