BNM governor highlights imbalances in property market as significant risk to overall economy in event of shock

BNM governor highlights imbalances in property market as significant risk to overall economy in event of shock

KUALA LUMPUR (Nov 17): The imbalances in the property market pose significant risks to the overall market in the event of a shock, said Bank Negara Malaysia (BNM) governor Tan Sri Muhammad Ibrahim as he briefed the media on the country’s economic growth for the third quarter.

Muhammad explained that while financial sectors’ exposure to this space is within a comfortable level, the oversupply in some of these segments could cause negative spillover effect to the broader economy.

Among the segments in the property market that were highlighted are high-rise condominiums, office space and retail malls.

“We have raised these issues for more than a year. Exposure of financial sector within this area is within a comfortable level. But if we’re not careful, the oversupply could have a negative impact on the economy,” he said.

Muhammad pointed out that the supply-demand imbalances in the property market has increased since 2015, pointing to the decade-high of unsold residential properties, with the majority of unsold units being in the above RM250,000 price category.

“The large number of unsold properties is due to the mismatch between the prices of new launches and households’ affordability,” he added.

For office space, there are also high office vacancy rates, especially in the Klang Valley. BNM’s report shows that the incoming supply of 38 million square feet of office space could exacerbate the glut.

According to Muhammad, the office vacancy rate in Klang Valley is projected to reach an all-time high of 32% by 2021, far surpassing levels recorded during the Asian Financial Crisis.

Similarly, in the retail space, it is expected that 140 new malls will enter the market across key areas such as Klang Valley, Penang and Johor, which could worsen the oversupply moving forward.

Despite of these threats, the banking system has remained supportive of housing financing, especially for first-time home buyers. In the first nine months of 2017, RM121.6 billion of new housing loans were approved by the banks, benefiting close to 300,000 borrowers. Of this, 60% were for the purchase of houses priced below RM500,000.

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IJM Construction bags RM378m job from See Hoy Chan

IJM Construction bags RM378m job from See Hoy Chan

KUALA LUMPUR: IJM Corporation Bhd’s construction unit has secured a RM378mil contract to build an environmentally-friendly corporate office tower in Damansara Uptown, Petaling Jaya.

It said on Monday its IJM Construction Sdn Bhd was awarded a contract from Damansara Uptown Retail Centre Sdn Bhd, a subsidiary of See Hoy Chan Sdn Bhd group, for the Uptown 8 tower (pic).

“The construction of the 31-storey tower with a net floor area of about 480,000 square feet (sq ft) will commence this month and is scheduled for completion in 39 months,” it said.

Built to attain LEED Gold status and green credentials, the Grade-A office building has two levels of commercial space and 1,387 parking bays. This is equivalent to one car park bay for every 345 sq ft of office space, a provision that goes beyond the 500 sq ft-to-one-bay requirement.

“We are pleased to appoint IJM again as they understand the importance of delivering high-quality outcomes, which is a perfect fit for the Uptown 8 project,” it said.

“Uptown 8 will mark the completion of the gentrification of Damansara Uptown. The office tower will complement Uptown Residences, the Starling Mall and Somerset Damansara Uptown serviced residence, in line with our target to transform the area into a one-stop gateway to business leisure and home,” said See Hoy Chan CEO Joe Tan.

IJM Corporation CEO and managing director Datuk Soam Heng Choon pointed out Uptown 8 is another great addition to IJM Construction’s portfolio of mixed-development projects.

“We take great pride in partnering with See Hoy Chan for the past three years in their journey to transform Damansara Uptown, which is an outstanding integrated development.

“The Starling Mall and Somerset Damansara Uptown serviced residence which IJM successfully completed, and now the Uptown 8 office tower will have a significant impact in the new ‘golden square’ of Petaling Jaya,” he said.


Tech changing office space trend as price down

Tech changing office space trend as price down

  • Thursday, 12 Oct 2017

Report launched: (from left) Sarkunan, InvestKL CEO Datuk Zainal Amanshah and Knight Frank Asia-Pacific head of research Nicholas Holt at the launching of Global Cities: The 2018 Report.

Report launched: (from left) Sarkunan, InvestKL CEO Datuk Zainal Amanshah and Knight Frank Asia-Pacific head of research Nicholas Holt at the launching of Global Cities: The 2018 Report.


KUALA LUMPUR: Technology is not only creating ripples in the retail scene. Two obvious trends are emerging in the Klang Valley office space.

Landlords are seeing a flight to quality as multinational companies (MNCs) and local corporations take advantage of the availability of better grade office space at competitive rates and attractive tenancy terms, said Knight Frank Malaysia executive director (corporate services) Teh Young Khean.

The second trend is the growth in serviced office segment, or co-working space, as millennials and older businessmen and women turn to short-term office rental of a month or two.

“It is clean, easy and convenient. The people who opt for serviced office space need not get into the hassle of hiring staff or buying furniture or other utility bills. When they rent serviced office space, all that comes in a single bill. They opt for this segment of the office space to meet a short-term need before they go to the next city,” said Teh.

Teh was speaking to StarBiz after the launch of the fourth edition of Global Cities: The 2018 Report.

Changes in technology is supporting a flexible working culture, said Teh, and this has resulted in the rising popularity of the serviced office segment.

“Demand for co-working space is expected to grow across a diverse mix of industries and professions such as technology start-ups and small- and medium-scale enterprises (SMEs).”

Teh said clients are searching for good deals in the office market in order to turn this space into co-working space.

A co-working space centre may have space of between 20,000 and 30,000 sq ft. Some could be larger.

But like everything else, they are selective.

The first, said Teh, is connectivity. It has to be close to public transport with easy access to amenities. This brings to mind mixed integrated development, said Teh.

“They also like malls because everything can be found under one roof,” said Teh. They also like new buildings with large floor plates although there are times when, if the opportunity arises, they can turn a single medium-level block into an entire centre of co-working space,” said Teh, who saw this happening in Singapore and other cities.

Teh said out of the 100mil sq ft of office space in Selangor and Kuala Lumpur, about 500,000 sq ft, or 0.5%, are being used as co-working space today.

“This is growing,” he said, due in part to high grade office space available at very competitive rental rates compared with other cities in the region.

Regus, the operator of co-working space, which has 30 centres across Malaysia has signed up for space in a strata office block in Bukit Bintang City Centre


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Mulia Group Signature Tower – Tun Razak Exchange TRX

Mulia Group Signature Tower – Tun Razak Exchange TRX

Signature Tower in Tun Razak Exchange or TRX Kuala Lumpur is build by China at a record speed of 1 floor in 3 days. Arguably the fastest construction in Malaysia so far.

The 106-story Signature Tower is 452.37 meter tall tower covering a total floor area of 380,000 sqm will become the tallest building constructed by Chinese company outside of China.

#TheSignatureTower #106SignatureTower #KLCC

HSBC Bank M’sia appoints IJM to build its HQ at TRX

HSBC Bank M’sia appoints IJM to build its HQ at TRX

KUALA LUMPUR: HSBC Bank Malaysia Bhd has appointed IJM Corp Bhd unit,  IJM Construction Sdn Bhd as the contractor to design and build its headquarters at the Tun Razak Exchange (TRX), Kuala Lumpur.

In a filing with Bursa Malaysia, IJM said the contract, worth RM392mil, did not include lift and facade works.

The company said the 37½-month project was expected to be handed over to HSBC by December 2020.

IJM said besides Tan Sri Tan Boon Seng @ Krishnan, being the common director of HSBC and the company, none of the directors or major shareholders of IJM, or persons connected with them, had any interest, direct or indirect, in the project.

In June this year, HSBC Bank Malaysia said it was investing US$250mil (RM1.06bil) to build its future headquarters office at TRX to develop Malaysia as a financial hub in Asean.

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PHB to sell Menara Bumiputra-Commerce in KL

PELABURAN Hartanah Bhd (PHB), which has close to RM6 billion worth of commercial assets and land, has decided to sell its 39-storey Menara Bumiputra-Commerce in Jalan Raja Laut in Kuala Lumpur for as much as RM560 million, sources say.

If sold, the 10-year-old building could be the real estate investment firm-cum-property developer’s first asset sale.

PHB group managing director Datuk Kamalul Arifin Othman declined to comment when contacted by The Edge to confirm whether the asset had been placed on the market.

Although rumours have been circulating for many months now that the building has been put up for sale, it is understood that an agency was hired only recently to seek a purchaser. The Edge understands that PHB has hired real estate agency Rahim & Co to conduct the sale. However, the latter’s director, Robert Ang, declined to comment on the matter as well.

The Edge also understands that PHB may have commenced negotiations with interested parties.

PHB had purchased Menara Bumiputra-Commerce for RM460 million from CIMB Group through a sale and leaseback arrangement in December 2007. CIMB, which wanted to house its then scattered retail banking operation at one location, leased the building for an initial 10 years. The building was ready in early 2009.

Kamalul was then quoted as saying that the purchase assured PHB of steady rental income from CIMB and would allow it to enjoy potential capital appreciation from being the owner of the office tower.

According to PHB’s website, the building has five levels of basement parking, offering 1,122 bays. The total net lettable area of the building is 626,672 sq ft. Based on the NLA, PHB paid about RM730 psf.

Valuers contacted by The Edge say the valuation of Menara Bumiputra-Commerce could be between RM850 psf and RM900 psf, which works out to between RM532 million and RM564 million. Other factors that could determine the pricing are the number of parking bays, if there is a long-term tenancy and recent transactions in the area.

Last month, AmanahRaya Real Estate Investment Trust (ARREIT) purchased the Grade A Vista Tower (with an NLA of 551,875 sq ft) at The Intermark in Jalan Ampang from BlackRock Inc. Based on the purchase consideration of RM430 million, the tower was sold for RM779 psf.

A year ago, Kumpulan Wang Persaraan (Diperbadankan) (KWAP) purchased Menara AIA Cap Square Tower in Jalan Mushi Abdullah — located just 3km from Menara Bumiputra-Commerce — for a reported RM511 million or RM849 psf. This Grade A office building with 461 parking bays was bought from Union Investment Real Estate GmbH. The building has an NLA of 601,796 sq ft.

It is unclear why PHB has decided to sell the building. Sources suggest that the move may be prompted by CIMB’s 10-year lease coming to an end. It is not known if CIMB will be renewing the lease and if so, for how long, and if it will take up less space. “Perhaps PHB feels the time is ripe to recoup its investment,” an industry player says.

PHB may want to use the proceeds from the sale as capital for its planned property development projects. In Kuala Lumpur alone — in Jalan Bangsar and Jalan Conlay — PHB has commenced two major property developments.

According to PHB’s website, it is planning a “sizeable dynamic mixed-use development” in Lot 20001, which is the former Unilever land in Bangsar. The development on the 19.6-acre parcel will be undertaken by PHB’s wholly-owned subsidiary, Bangsar 61 Sdn Bhd.

The Edge had previously reported that the GDV of the project on this piece of land located at the intersection of Jalan Bangsar and Jalan Maarof could be over RM5 billion. A visit to the site shows some activity and land clearing work has commenced.

In Jalan Conlay, PHB is planning an integrated commercial development on a 6.8-acre parcel located near Jalan Bukit Bintang, where the former office of the Kuala Lumpur Regional Centre for Arbitration was located. Industry estimates put the GDV of this project at RM3.8 billion.

In Terengganu, meanwhile, PHB is building a mixed-use development with an estimated GDV of RM700 million.

It is noteworthy that a year ago, PHB hired global real estate service provider Savills (M) Sdn Bhd to look for purchasers for a 790-acre tract it owns in Ulu Bernam, Selangor. The value of the land, located 18km south of Proton City in Tanjung Malim, was estimated at RM206 million or RM6 psf. The Edge understands that this land has not been sold. Moreover, PHB’s website states that it owns land in Tanjung Malim.

The company also has land in Cyberjaya, Petaling Jaya, Klang and Kuala Terengganu.

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Leasing market likely to remain challenging

THE leasing market for prime office space in Kuala Lumpur is expected to remain challenging as new supply comes in.

Rents for older buildings in the Golden Triangle may come under pressure as landlords look for tenants to backfill space vacated by companies that are either downsizing or moving out of the area.

The Golden Triangle is the premium business district with a high concentration of tenants from the banking, insurance and services sector.

It is also Kuala Lumpur’s main shopping and nightlife district, as well as home to four- and five-star hotels.

According to the Knight Frank Asia-Pacific Prime Office Rental Index for the first quarter of this year, rent in Kuala Lumpur quarter-on-quarter declined by 0.9 per cent and 0.8 per cent respectively, with the market anticipating significant incoming supply this year.

Knight Frank Malaysia executive director of corporate services, Teh Young Khean, said the Kuala Lumpur office market continued to be under pressure during the quarter under review amid high impending supply and weak occupational demand.

According to the National Property Information Centre’s property market report for last year, office building completions in Kuala Lumpur were around 320,643 sq m, but the take-up rate was only for 24,646 sq m.

New supply of office space for Kuala Lumpur this year and next year is expected to be between 4.72 million and six million sq ft, respectively.

Among the mega real estate projects that will add on to the worrying supply of office space in Kuala Lumpur are the Tun Razak Exchange, KL118, Bandar Malaysia and Bukit Bintang City Centre.

Teh believes that landlords, faced with current challenges in the market, may be more willing to make concessions.

Singapore, which expects its prime-office leasing market to bottom out next year, is also facing a similar decline in rental earnings, the index showed.

The Asia-Pacific Prime Office Rental Index was launched recently. It sees the addition of Manila, bringing the total number of markets tracked to 20.

For the first quarter of this year, the index grew one per cent quarter-on-quarter due to rising rents in 10 of the markets over the quarter, with rental declines experienced in five of the 20 markets tracked.

Knight Frank Asia Pacific head of research, Nicholas Holt, expects an improving outlook for Asia-Pacific prime office markets with stable economic growth strengthening occupier demands.

“United States political uncertainty, rising interest rates and Chinese capital controls all made waves during the first quarter of this year. Amid these uncertainties, however, global economic activity continued to gain momentum.

“With a moderate rise in commodity prices and improving market sentiment, these positive elements bode well for several Asia-Pacific prime office markets for the rest of the year,” said Holt.

Over the next 12 months, Knight Frank expects rents in 15 out of the 20 cities to either remain steady or increase, which is up from 12 in its previous forecast.

Bangkok continues its strong performance, recording both the highest year-on-year (9.6 per cent) and quarter-on-quarter (3.1 per cent) growth rates in Asia-Pacific.

Rents have been increasing for more than two years and it may persist due to strong absorption amid tight supply.

China’s prime office market seemed to be moving positively.

Grade A office rents in Shanghai remained unchanged for the third consecutive quarter, as strong demand from fast-moving consumer goods and retail enterprises counterbalanced the completion of 720,000 sq m of prime space.

Similarly, Beijing welcomed 135,800 sq m of prime stock last quarter with rents staying high, as finance, Internet and high-tech sectors continue to drive leasing activity in the Chinese capital.

In Guangzhou, however, the vacancy rate declined by 3.5 percentage points to 13 per cent with no new prime office space coming on line during the quarter.

Mainland China companies remained the most important source of new take-up in central Hong Kong.

Landlords stayed aggressive due to limited supply, thus further pushing rental levels upwards.

Across Australia, all four major cities tracked saw their prime rents increase last quarter.

Strong demand continued to drive rental growth in Sydney and Melbourne central business districts, reinforced by these periods of little new development and stock withdrawals.

Net absorption for premium office buildings in Perth has benefited from the flight-to-quality with tenants relocating from Grade-A and below to higher quality premium space.

Brisbane experienced a decline in vacancy rate due to a combination of rising demand from the expanding state government workforce and the withdrawal of office stock.

Source : NST