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MarketBeat Kuala Lumpur, Malaysia Office Snapshot - Q4 2011

Apr 06, 2012
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MARKETBEAT
OFFICE SNAPSHOT
A Cushman & Wakefield Research Publication

KUALA LUMPUR, MALAYSIA Q4 2011

ECONOMY
The Malaysian economy registered 5.8% GDP growth during the third quarter of 2011 (the second quarter of 2011 achieved a 4.3% GDP growth). The higher growth is supported mainly by domestic demand which recorded a 9% growth, driven by the expansion in household and business spending, as well as public sector expenditure. Nevertheless, the prolonged Eurozone crisis and the slower economic growth in the U.S. have increased the downside risk to global economic growth in 2012. In anticipation of the challenges from the slower global economic growth, Bank Negara Malaysia announced in November its decision to maintain the Overnight Policy Rate at 3%. Meanwhile, the Government's efforts in implementing the Economic Transformation Programme (ETP) since October 2010 have also received encouraging response from the local and foreign business sectors. For FY2011, the Malaysian Government, Malaysia Institute of Economic Research and IMF have forecasted the Malaysian economy to grow at 5% to 5.5%, 4.6% and 5.2%, respectively.

OUTLOOK
An estimated 5.0 million sf of office space is expected to come onstream by end-2012 and is thus expected to put more pressure on landlords of existing and new buildings to secure tenants. Leasing terms are expected to be more favourable to tenants in the short to medium term. Nevertheless, demand for office space at good quality buildings with strategic locations are expected to remain stable in this competitive environment.

STATS ON THE GO
4Q11 Vacancy Grade A Overall Rents 20.3% RM7.21 Q-O-Q CHANGE 5.3% 10.4% Y-O-Y CHANGE 5.3% 15.4% 12 MONTH OUTLOOK

Note: (1) For Kuala Lumpur CBD Office Market only (2) Based on new sampling of Grade A buildings

ECONOMIC INDICATORS
MALAYSIA *GDP Growth **CPI Growth **Unemployment 2010 7.2% 1.7% 3.2% 2011E 4.6% ­ 5.5% 2.5% - 3.5% 3.2% 2012F 5% - 5.1% -

RENT AND VACANCY RATE
In the fourth quarter of 2011, the research division has conducted a review and restructuring on the sample basket of monitored Grade A office buildings in the Klang Valley. In this quarter, a net effective gross rent of RM7.21per square feet (/sf) has been recorded - indicating resilient rent for both the premier existing and new buildings in the KL CBD office market. With the completion of new buildings, i.e. Menara Prestige and Menara Worldwide, a 20.3% vacancy rate was recorded and it was higher than the 15% reported in the previous quarter. Nonetheless, we expect that the slow take-up will improve marginally over the next six to nine months'. Overall, vacancy rate for selected Grade A buildings in the Klang Valley office market (which includes KL CBD, KL Fringe, Decentralized Area and Cyberjaya) is estimated at 15.7%. The overall average net effective gross rent for the Klang Valley market is reported at RM5.99 /sf.

SOURCE: *Bank Negara Malaysia; MIER; IMF; News articles, MIER & IMF websites (for latest 2012 forecast) **Bank Negara Malaysia

GRADE A OVERALL RENTAL VS. VACANCY RATES
8.00
RM/sq.ft/mth

25% 20% 15% 10% 5% 0% 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 Grade A Net Effective Rent (RMpsf) Vacancy

6.00 4.00 2.00 0.00

DEMAND SUPPORTED BY EXPANSION OF BUSINESS UNITS
Leasing enquiries were active over the last nine months of 2011 ­ supported by demand from Oil & Gas, Financial institutions, FMCG, Services, IT and BPO sectors. Expansion in Islamic banking, existing business operations and back-room operations also played important roles in generating demand for office space.

KUALA LUMPUR MARKET STATISTICS
SUBMARKET INVENTORY OVERALL VACANCY RATE UNDER CONSTRUCTION YTD CONSTRUCTION COMPLETIONS 0 89,986 89,986 315,210 0 405,196 OVERALL DIRECT NET ABSORPTION -220,111 52,732 -167,379 300,442 -150,329 -17,265 GRADE A AVERAGE NET (RM/SQFT/MTH) 3Q11 6.53 5.61 6.25 4.11 4.10 RM5.64 4Q11 7.21 5.75 6.48 4.31 4.10 RM5.99 US$ SF/YR 4Q11* $27.34 $21.80 $24.57 $16.34 $15.55 $22.71 EURO SF/YR 4Q11* 20.96 16.71 18.83 12.53 11.92 17.41

KL CBD KL FRINGE SUBTOTAL - KL SELANGOR CYBERJAYA & PUTRAJAYA TOTAL

35,308,885 34,429,765 69,738,650 22,231,070 2,601,247 94,570,967

16.9% 26.3% 21.5% 24.4% 39.8% 19.4%

4,507,232 8,292,035 12,799,267 4,486,393 1,900,721 19,186,381

*RENTAL RATES REFLECT ASKING $PSF/YEAR Source: yyps research, napic report

MARKET HIGHLIGHTS
SIGNIFICANT 4Q11 LEASE TRANSACTIONS BUILDING Vista Tower Vista Tower Bangsar South @The Horizon ­ Blk 6 1 First Avenue Menara Mustapha Kamal Menara KLK MINES 2 MINES Waterfront Business Park MARKET KL CBD KL CBD KL Fringe Decentralized Area Decentralized Area Decentralized Area Decentralized Area Decentralized Area TENANT UOB Singapore UOB Malaysia Touch N Go CSC MMC-Gamuda Taiko Sewerage Services Department, Ministry of Energy, Green Technology & Water UCTI BUILDING CLASS A A A A A A A A SQUARE FEET 77,000 33,000 67,000 70,000 100,000 22,000 61,000 59,366

SIGNIFICANT 4Q11 SALE TRANSACTIONS BUILDING Bangunan Takaful Ikhlas MARKET Decentralized Area BUYER Masterskill (M) Sdn Bhd PURCHASE PRICE (RM) 27,000,000 SQUARE FEET 173,190

SIGNIFICANT 4Q11 CONSTRUCTION COMPLETIONS BUILDING Menara Prestige Menara Worldwide KL Sentral Park - Block B to E KL Sentral Park ­ Block A Bangsar South ­ Block 1 to 8 MARKET KL CBD KL CBD KL FRINGE KL FRINGE KL FRINGE MAJOR TENANTS KFH SME, SPAD, SBM Offshore SQUARE FEET 540,000 277,000 342,700 94,000 1,320,000 COMPLETION DATE 4Q2011 4Q2011 4Q2011 4Q2011 4Q2011

SIGNIFICANT4Q11 PROJECTS UNDER CONSTRUCTION BUILDING Menara 3 PETRONAS Menara Binjai Menara Felda Integra Tower @ The Intermark Menara Darussalam 348 Sentral MARKET KL CBD KL CBD KL CBD KL CBD KL CBD KL FRINGE MAJOR TENANTS Felda Shell Malaysia SQUARE FEET 840,000 330,000 689,000 777,000 164,000 500,000 COMPLETION DATE 1Q2012 1Q2012 2Q2012 2Q2012 2Q2012 2Q2012

* RENEWAL - NOT INCLUDED IN LEASING ACTIVITY STATISTICS

Lot 3A-I, Level 4, Wisma WIM 7 Jalan Abang Haji Openg Taman Tun Dr Ismail 60000 Kuala Lumpur, Malaysia Tel: +603 7728 8116 (Agency & Corporate Real Estate) Tel: +603 7728 4117 (Valuation & Consultancy) www.yypropertysolutions.com

This report contains information available to the public and has been relied upon by Cushman & Wakefield on the basis that it is accurate and complete. Cushman & Wakefield accepts no responsibility if this should prove not to be the case. No warranty or representation, express or implied, is made to the accuracy or completeness of the information contained herein, and same is submitted subject to errors, omissions, change of price, rental or other conditions, withdrawal without notice, and to any special listing conditions imposed by our principals. ©2012 Cushman & Wakefield, Inc. All rights reserved.