Corporate Office Space – not all doom and gloom

Office market — not all doom and gloom

MAREC 17 group pic

DESPITE the current soft commercial office market, Khong & Jaafar Sdn Bhd managing director Elvin Fernandez believes that there are office units that still offer good rental yields.

“The office market in the Klang Valley, in general, has an overall supply of 122.37 million sq ft of office space, of which vacant office space accounts for 29.5 million sq ft.

“Thus, the occupancy rate is 75.89% as reported by the National Property Information Centre, as at 3Q2016. However, just because the office market is in an overall oversupplied state, it does not mean that all is bad. There will always be office buildings that are attractive investments because they may be in a specific location or have an MSC or green status [for the building],” Fernandez told TheEdgeProperty.com.

Fernandez was one of the panellists for the Multi-Million Dollar Deal Forum held at the Malaysian Annual Real Estate Convention (MAREC‘17) together with Savills Malaysia executive chairman Datuk Christopher Boyd and JLL Malaysia Property Services (Malaysia) Sdn Bhd country head and managing director YY Lau. The session was moderated by Zerin Properties group CEO and founder Previndran Singhe. The forum was held on the first day of the two-day convention last week.

“Some buildings have long-term tenants [and some are blue chip tenants] and with fixed step-up rents. Such buildings are more attractive from an investment point of view and usually command higher net yields [forward yields] and, therefore, higher values psf,” Fernandez shared during the forum.

“A good grade A office building may, for instance, command about RM1,000 psf based on the total net lettable area, and for buildings [with long-term tenants and fixed step-up rents], the rents could be anything between RM1,000 psf and RM1,500 psf,” he said, adding that these are the offices that investors should focus on.

JLL’s Lau agreed that offices which can command decent rental yields are still available. In addition, she said that investors could buy old offices and add value to them by refurbishing them.

Another sector investors could pay more attention to in the next two years could be industrial properties and buildings in transit-oriented developments as they could bring good returns, Lau said.

During the forum, Lau also lamented the lack of real estate data in Malaysia. She said there is a need for more statistics in the real estate industry so that the correct information could be conveyed to both sellers and buyers.

“Sometimes, clients ask me, what is the price differential for a building in Jalan Sultan Ismail and Jalan Ampang? We don’t seem to be able to give them such information because we lack such statistics unlike Singapore,” she shared.

Meanwhile, Boyd said he sees a trend for more joint ventures for residential developments especially large developments that need more capital to develop.

“Landbanking is going to be a thing of the past. Developers with good reputation will be matched with landowners. It all comes down to financial engineering,” he noted.

The two-day annual convention was organised by The Malaysian Institute of Estate Agents.

 

Source: The Edge Property

 

Office Buildings and Mall Switches Hand

CapitaLand acquires three office buildings and a mall in Tokyo for S$620.1 mil

SINGAPORE (Feb 17): CapitaLand has agreed to acquire a portfolio of four income-producing office and retail properties in Japan’s Greater Tokyo Area, at ¥49.7 billion (S$620.1 million or RM1.95 billion).

CapitaLand says the acquisition will strengthen the group’s foothold in Greater Tokyo and increase the its total asset size in Japan to about S$2.5 billion (RM7.86 billion).

The portfolio comprises two office buildings in Yokohama — Yokohama Blue Avenue and Sun Hamada; one office building in Tokyo – Kokugikan Front; and one shopping mall in Saitama — Seiyu & Sundrug.

Including transaction costs, the total investment for the portfolio is about ¥51.0 billion.

The sale and purchase agreements were signed its by CapitaLand’s wholly owned shopping mall business CapitaLand Mall Asia.

Jason Leow, CEO of CapitaLand Mall Asia and Co-ordinating CEO, Asia of CapitaLand, said, “This latest acquisition will deepen the group’s presence in Greater Tokyo through assets with stable yields and recurring cash flow. Immediately accretive with upside potential, this acquisition will contribute a net operating income of about S$25 million per year…”

The acquisition will be financed by a combination of internal funds and borrowings, and is expected to be completed in the first quarter of this year.

CapitaLand owns and manages four shopping malls in Japan – namely Olinas Mall, Vivit Minami-Funabashi and La Park Mizue in Tokyo; as well as Coop Kobe Nishinomiya-Higashi in Kobe. Through its wholly owned serviced residence arm, The Ascott, CapitaLand owns and manages 46 properties with more than 3,500 apartment units in Japan. The group’s Japan portfolio also includes a 20% stake in an office building — the Shinjuku Front Tower.

Shares of CapitaLand closed 4 Singapore cents lower at S$3.45 on Thursday. —

Source : The Edge Markets Singapore

Menara Prudential Building Sold!

KL 33 Properties buys Menara Prudential Building for RM125 mil

PETALING JAYA (Feb 17): Property investment and holding company KL 33 Properties Sdn Bhd has acquired Menara Prudential (pictured) in Kuala Lumpur city centre for RM125 million, according to JLL Malaysia who is the transaction advisor on behalf of the seller — OCBC Properties (M) Sdn Bhd.

“We are pleased to have supported both the seller and buyer on their exit and growth strategy throughout the transaction.

“This transaction has presented a rare opportunity for the purchaser to own a Grade A asset in an easily-accessible location with high quality office space.

“Given the improved public transport infrastructure in Kuala Lumpur, we’re starting to see a spike in demand for projects with good connectivity,” said JLL Malaysia country head, Y Y Lau.

Located in Kuala Lumpur city centre’s prime financial district, the 24-storey Menara Prudential is set along the bustling Jalan Sultan Ismail and has a net lettable area of 164,706 sq ft. It also serves as the head office for its anchor tenant, Prudential Assurance Malaysia.

Meanwhile, KL 33 Properties property director, Mike Kan said the company would like to bring the building up to the high standards of modern offices.

“We plan to undertake a major transformation programme to see the building refreshed with IT facilities, an intelligent building system, a modern and revamped entrance lobby and refurbished interiors,” he said.

JLL Malaysia has advised OCBC Bank (M) Bhd on the sale of two buildings — a four-storey commercial building along Jalan Hang Kasturi in Kuala Lumpur and a three-storey heritage building at Lorong Hang Jebat in Melaka previously in 2015 and 2013, respectively.

 

Source : The Edge Property

New Transportation Projects Lead to Increase of Office Relocation

New Transportation Projects Lead to Increase of Office Relocation

February 10, 2017

New Transportation Projects Lead to Increase of Office Relocation

 

More firms are expected to move into Kuala Lumpur’s central business district (CBD), as connectivity is set to be significantly upgraded, while rental prices in the city’s outskirts become more similar to that in downtown, reported The Edge Property.

“Companies considering relocation or setting up a new office may view the CBD as a good possible option because of attractive rental rates, while traffic congestion may no longer be an issue once the Mass Rapid Transit (MRT) and other infrastructure is in place by mid-2017 onwards,” said YY Lau, Country Head of JLL Malaysia.

Previously, Multinational companies (MNCs), including Accenture, BG group and Wong & Partners, moved out of the CBD due to the frequent traffic jams there and the more affordable rental prices in the city fringe.

“Infrastructure is definitely one of the factors that drives office demand.” In fact, connectivity is the most important criterion for all of JLL Malaysia’s customers that want to relocate, noted Lau, adding that firms may move back to the CBD beginning this year.

One key reason behind this trend is the new MRT and Light Rail Transit (LRT) lines, which will further improve transportation, as well as attract more companies to invest in the capital, said InvestKL CEO Datuk Zainal Amanshah.

“Upcoming hubs here will be reachable by public transport and people won’t need to own a car anymore,” said Zainal, who is targeting to attract 100 MNCs to set-up a presence in Malaysia by 2020.

Meanwhile, the office supply glut in the CBD is expected to persist this year, while landlords with office properties in downtown are reducing rents to compete with office buildings in the outskirts and decentralised areas (DC).

Conversely, rents in the city fringe are rising due to healthy demand, which is expected to increase further once MRT line 1 becomes operational.

However, Lau said there is a possibility that office rents will decline by up to 10 percent this year in the CBD, KL fringe and decentralised areas (DC).

“In the CBD, it will drop because of the oversupply situation. The oversupply will also come into play for the KL fringe this year, with some new projects completing. For DC, there is no oversupply situation, but there will be in Cyberjaya and Putrajaya,” she added.

Image sourced from Getty

 

Source : Property Guru