Malaysia’s real estate market is expected to remain sluggish this year due to a supply glut in the retail and commercial segments, according to property consultancy Rahim & Co International, reported the Sun Daily.
“On the commercial side, there is a problem of oversupply. Within the next two to five years, 15 million sq ft are coming into the market. That is worrying because the occupancy rate of office space has now dropped to [below] 80 percent.”
With this situation, the rental income of building owners would significantly decline, and this poses a serious problem, especially if the landlord has taken out a loan to buy or build the property, said Rahim & Co’s Executive Chairman Tan Sri Abdul Rahim Abdul Rahman.
“The older buildings are going to suffer. The new ones may be okay. On the positive side, rentals are not going to go up anymore.”
According to Rahim & Co’s latest Property Market Review, the average occupancy rate of office space in Kuala Lumpur dipped from 81 percent to 79.7 percent in Q3 2016.
At the same time, 509,000 sq ft of new office space were completed in the capital, with total supply reaching 90.8 million sq ft, up 0.6 percent from the corresponding period in 2015. But by 2020, over 10 million sq ft is expected to enter the market.
Meanwhile, Abdul Rahim warns of a possible oversupply of retail space, with approximately six million sq ft of space coming on stream over the next two to three years.
“There is a worry that these spaces may not be occupied. The positive part of it is people who do business have choices and rentals may not be as high as before. There could be some drop in prices. In my opinion, there is an overbuilding of shopping centres.”
Nevertheless, well-managed shopping centres located in good areas and with sufficient parking space are expected to remain in demand, but those in remote places could see a drop in shoppers, he explained.
“I don’t know the tipping point (for retail space) but I would be comfortable with an additional two million sq ft, not eight million sq ft or more.”
This is because the existing inventory of retail space had already increased by 8.2 percent year-on-year during the first nine months of 2016, while occupancy dipped from 86.5 percent to 84.7 percent.
Furthermore, Rahim & Co’s Research Director Sulaiman Akhmady Mohd Saheh, revealed that overall property transactions decreased by 11.9 percent to 239,983 during 9M 2016, while their total value slumped by 16.4 percent to RM95.4 billion. For the whole of 2016, the latter is expected to fall by five percent to 10 percent.
Looking ahead, the total value of deals is expected to remain unchanged in 2017, while the overall rate of decline in property transactions is forecasted to moderate to five percent to 10 percent from approximately 10 percent to 15 percent last year. However, it is expected to climb again in 2018, gaining about 10 percent over the next 24 months.
“We think that 2017 will still be a slow year but the decline will not be as sharp compared with last year,” he added.
Image sourced from Timeout
Radin Ghazali, Content Writer at PropertyGuru, edited this story. To contact her about this or other stories email radin@propertyguru.com.my
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