Commercial property:Learning from past experience

Glomac Bhd group managing director and CEO Datuk FD Iskandar has every reason to be proud of the group’s achievements in commercial development — since 1993 the group has successfully completed 5.4 million sq ft of commercial space with a total sales value of about RM1.4 billion. But the journey is far from over. With the launch of a few projects in 2008 and early this year, and a few more on the drawing board, the group looks set to make its presence felt in the commercial property market.

Iskandar acknowledges that the experiences of the past 16 years have given the group invaluable lessons where developing commercial property is concerned. “Give the market what it wants,” he says, adding that understanding market needs means having to continuously carry out feasibility studies, send out questionnaires and feelers to prospective buyers as well as communicate with real estate agents. These efforts have not been in vain, he says, pointing to the take-up for the group’s more recent commercial offerings.

For instance, the first phase of the freehold Glomac Damansara — fronting Jalan Damansara — comprising 12 blocks of 5 and 8-storey shopoffices has received encouraging sales response since its launch in April. Both the 8-storey blocks, with price tags in excess of RM7.5 million, and half of the 5-storey blocks pegged from RM4 million have been sold. The group’s commercial property offerings last year also received good response — the 22 units of 5-storey shopoffices at Glomac Galleria in Sri Hartamas received such overwhelming interest that the developer decided to sell the units via a tender process. According to Iskandar, almost 600 prospective buyers tendered for the units that were subsequently sold for almost 20% more than the reserve price. Similarly, the 70 units of 2 and 3-storey shopoffices at Seri Bangi, Selangor (pegged from RM600,000 to RM850,000 respectively), were snapped up within two weekends, says Iskandar. Iskandar:Give the market what it wants

While the encouraging sales are a boost — particularly given the dampened mood in the property market stemming from the overall local and global economic slowdown — the group is not about to rest on its laurels. “It’s important for us to keep on being innovative, to provide value-for-money properties and to give priority to property management and after-sales service,” says Iskandar.

The group, which celebrates its 21st anniversary this month, ventured into commercial property back in 1993 with the development of Glomac Business Centre in Kelana Jaya, Selangor. “The easiest development then would have been a 3 or 4-storey shopoffice but having seen examples of business parks overseas, we decided to offer something else. So, with some imagination and lots of gung ho, we decided on 5 and 6-storey shopoffices with a better façade, lifts, basement parking, security and property management services,” recalls Iskandar. Thanks to the concept, the units tagged from RM1.3 million to RM1.5 million were well received. From here, the group moved on to other commercial developments, namely Kelana Business Centre and Kelana Centre Point (both in Kelana Jaya) and Dataran Prima in Petaling Jaya.

Thanks to its successes and raised profile in developing commercial properties, the group was asked to undertake a few projects on a joint-venture basis with various landowners; leading to projects such as Worldwide Business Park in Shah Alam and Bandar Sri Permaisuri in PJ. “At that time, this [commercial property] was our niche…we were selling RM8 million to RM10 million of properties a month,” Iskandar adds.

But the scene changed at the onset of the Asian financial crisis in 1997 and marked the start of a few difficult years for the group. “In 1998, we were not selling any commercial properties at all,” says Iskandar. He points out that it wasn’t because of a lack of buyers but due to property being considered “unproductive” at the time. As a result, financial institutions were unwilling to give out loans; what’s more, interest rates at the time went up to a whopping 20%. “So we had people interested in the properties but they couldn’t get financing,” Iskandar adds.

Reprieve for the group came at the end of 1998 with the introduction of the Malaysian Property Expo and the incentives offered for properties priced below RM150,000. Being a relatively small company at the time, the directors at Glomac decided to switch its focus and concentrated instead on developing medium-cost terraced houses. “Lucky we were nimble enough and we continued on this path up to 2002,” says Iskandar.

In 2003, the group embarked on a new upmarket mixed development, Aman Suria in PJ. “For the 12 acres of commercial land, we went back to our bread-and-butter commercial property product of 2 and 3-storey shopoffices because we felt the market was not ready to take up 5 and 6-storey commercial parks,” Iskandar says. The decision bore fruit — the units, pegged from RM888,000 for the intermediate units, RM1.2 million and RM1.4 million respectively for the end and corner lots, were snapped up. “This gave us the confidence to go back to the commercial sector and so The group's maiden office tower, Glomac Tower, was sold en bloc even before any construction was donewe started to look for land,” says Iskandar.

Being innovative

Emerging from the Asian financial crisis of the late 1990s with a more diversified portfolio — of landed and strata residential projects as well as commercial developments — the group decided to put its experience over the years to use. “We became more innovative with our commercial developments and explored new concepts,” Iskandar says, pointing to newer projects such as Plaza Kelana Jaya and Plaza Glomac (both in Kelana Jaya).

At Plaza Kelana Jaya, a lakefront commercial development, the developer experimented with 3 and 4-storey shopoffices boasting dual frontage (of the central piazza and the lake). At Plaza Glomac, the developer linked the shopoffice development to the existing Kelana Centre Point via pedestrian walkways. These concepts appear to have gone down well with property investors, with both developments being fully sold.

While over the years the group has concentrated on shopoffice developments, in 2007 it embarked on its maiden office tower development, the 40-storey Glomac Tower in the Kuala Lumpur City Centre area. Here too, the group had reason to smile; in March 2008, even before any construction was done, the building was sold en bloc for RM577 million. At RM1,160 psf, the deal hit a record price and set a new benchmark for Grade A office buildings in the city centre.

Going forward, while the group has indicated that it is keen to develop more Grade A purpose-built office towers in the city centre, the suburbs also offer opportunities.

According to Iskandar, on the drawing board is a plan to build two tower blocks and a 200,000 sq ft neighbourhood mall on the site of the Kelana Seafood restaurant in Kelana Jaya. The 3.5-acre development boasts a gross development value of RM300 million. The group also has plans to develop a RM300-million commercial project — comprising office towers and a neighbourhood mall — in Mutiara Damansara, PJ. Judging by these plans, it looks as if Glomac will continue to make its presence felt in the Klang Valley’s commercial property market.

For details, call (03) 7801 9000.

This article appeared in Commercial Property, the Special Focus pullout of The Edge Malaysia, Issue 761, June 29 - July 5, 2009.
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