A real estate expert thinks that the vacancy level in Klang Valley’s office market would rise marginally this year, but he expects it to reach a point where one out four properties would be left unoccupied until 2021 or 2022, reported the Sun Daily.
“I think we are going to see a slight rise in vacancy rates and we’ll see a little bit more downward pressure on rentals before the market stabilises,” said Savills (Malaysia) Sdn Bhd Executive Chairman Datuk Christopher Boyd on Tuesday (20 March).
“Vacancy rates now, depending on which sector you are talking about, is between 20 percent and 25 percent. That’s not the worst I’ve seen in my lifetime but I think it will hover at around 25 percent or so until the surplus space is absorbed, which will probably be by 2021 or 2022.”
He revealed that overall office space in the area presently amounts to around 120 million sq ft. Demand is two to three million sq ft per annum, but about five million sq ft are expected to enter the market in the next three years.
While the amount of office premises being constructed surpasses short term market demand and is putting downward pressure on office rents, Boyd believes that a temporary vacancy is not “life threatening” as companies build office buildings that will remain for 50 years or 100 years.
“What is good is that the current modern new generation of office buildings is very much better than the older generation’s. They have bigger floor plates and they are better specified. They have more amenities for tenants in terms of canteens, gyms and so forth. Office workers demand these things these days. You have to look at it as an evolutionary process which will sort itself out in the medium term,” he opined.
Asked about the co-working space trend in Klang Valley, Boyd said this is unlikely to negatively impact the demand for traditional office premises but may reposition it.
He explained that co-working spaces allows tenants to lease based on the size of their needs. For instance, they can rent a single desk or 100 desks. Meeting rooms can be reserved at a short notice, while some operate like clubs as members can book space at any of their branches.
“So they aim to be not just in the Golden Triangle but out in the suburbs, in little satellite offices, in other cities like Penang, Kuantan, Johor Bahru and so forth,” he noted, adding that major firms turn to co-working space for expansions, in addition to their core offices.
“We’ve had tenants tell us, we want 50,000 sq ft now but we would like to have first option on another 20,000 sq ft which we think we may need in a year’s time. That problem is gone now because when they want extra space, they can just take it at short notice.”
Meanwhile, Boyd expects the situation in Malaysia’s housing sector to improve after the 14th General Election this year. However, a “price explosion” is unlikely to occur as developers still have a substantial backlog of unsold units.
This article was edited by the editorial team of PropertyGuru. To contact them about this or other stories email editorialteam@propertyguru.com.my
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