News

Office demand is expected to improve gradually this year.

Blame it on a lack of new launches during the month.

More diverse range of work options, such as repurposed workplaces and better-equipped home offices, could be part of the new normal.

With a younger tenant mix, demand for more efficient spaces and flexible lease terms is now higher than before.

Meanwhile, prime high street rents contracted -1.0%.

Blame it on the high vacancy rates. Mass projects launched were generally well received during the quarter, owing to robust pent-up demand. For example, all the 769 units and over 95% of the 1,391 units launched at Pavilia Farm (Phase 1 & Phase 2 respectively) were sold. The project sits atop Tai Wai Station and is jointly developed by New World Development and MTRC. According to JLL, with uncertainty in the economic outlook and the fact that rental markets are typically slower towards year-end, leasing activity was quiet. The situation appeared to be more notable in the high-end segment as landlords were more willing to soften asking rents to attract tenants. Up to 4,800 private supply units in 1Q21 A total of 111 luxury units are expected to have received their occupation permits in 4Q20. Notable projects include 21 Borrett Road (Phase 2) by CK Asset in Mid-levels (50 units) and Grand Homm by Goldin Financial (18 unit) in Ho Man Tin. The government has earmarked three residential sites for sale by tender in 1Q21, including one each at The Peak, Kwun Tung and Kai Tak, capable of yielding 2,240 flats in total. Together with the supply from Package 6 of the Wong Chuk Hang Station project, and private development and redevelopment sources, land supply for private housing from the quarter is estimated to reach 4,800 units. Luxury capital values decline against weak demand With demand for luxury properties staying weak, more owners were willing to reduce prices, resulting in a drop of -2.4% q-o-q in luxury capital values in 4Q20, after dropping by a similar magnitude (-2.5%) in the previous quarter. In 2020, luxury capital values dropped -8.2% y-o-y in total. Amid the holiday season and limited expatriate arrivals, leasing momentum remained weak in 4Q20, with luxury rents falling by -3.8% q-o-q, after a -3.6% q-o-q drop in 3Q20. Outlook: Drop in capital values to slow amid low interest rate A potentially less tumultuous year in 2021 and the low interest rate environment are expected to support housing demand, especially in the mass segment. We expect transaction volume for luxury properties to pick up mildly, though still remain much lower than historic levels. Given a high vacancy level, luxury capital values are still expected to remain soft, dropping in the range of 5-10% in 2021. In view of ongoing border shutdown and corporates’ focus on cost saving, expat arrivals are likely to remain low and with their housing budgets tight in the near term. Luxury rents are expected to drop by 5-10% in 2021, in line with capital values.

It also reached out to displaced jeepney and tricycle drivers to facilitate delivery of orders to far-flung locations in the Philippines.

The 1.4% dip in warehouse leasing volume was outweighed by the increases in single- and multiple-user factories.

Inner city areas have higher vacancies, whilst those in outer ring suburbs remain low and rents for houses are growing.

Capital values in 4Q20 increased 10% yoy to PHP 269,932 per sqm.

Environmental, social, governance demands are mounting in all real estate assets groups.

Electrification is a crucial step to decarbonise the sector.

Analysts expect prices to increase by 5.5% but there is a high chance of overshooting.

The KLC submarket recorded the steepest decline of -1.4%. Weaker demand and shrinking pool of tenants continued to exert downward pressure on occupancy rates. According to JLL, tenants across various industries, for example oil & gas, recruitment firms, automotive, aviation, travel & tourism, etc. were continuing to right-size their office footprints. The current work-outside-office arrangements among most occupiers continued to dampen demand for office space. Tenants were continuously offered incentives such as rent-free periods, refitting incentives, flexible tenancy terms and flexible space usage. There were plenty of fitted-out units available at negotiable rents, reducing the capex for prospective tenants. Despite the soft market environment, buildings in strategic locations with great connectivity and close to neighborhoods were still holding up. Weak absorption and new completions further increase vacancy Menara MyIPO in PJ Sentral and Menara TCM at Jalan Tun Razak obtained CCC during the quarter. MyIPO will be occupying around 70% of Menara MyIPO, its new headquarters. Both the buildings were MSC cybercentres and GBI accredited. Menara TCM is additionally designed for LEEDS Gold Accreditations. The overall vacancy rate in Greater Kuala Lumpur increased by 0.3 ppts as the supply-demand mismatch continued to widen. Vacancy in KL City (KLC) increased by 0.8 ppts due to the completion of Menara TCM and soft take-up. The KL Fringe submarket remained stable. The Decentralised (DC) submarket recorded an improvement in occupancy, supported by owner occupied space in Menara MyIPO at PJ Sentral. KLC rents undergo more correction but Fringe holding firm Overall net effective rents in Greater Kuala Lumpur fell by -1.1% q-o-q. KLC submarket recorded the steepest decline of -1.4%. Net effective rents in KL Fringe fell by -0.8% q-o-q, while the DC submarket remained stable with a change of 0.1% q-o-q. Landlords were providing more rental incentives to retain their tenants, as opposed to leaving their office space unoccupied. UOA REIT acquired UOA Corporate Tower in Bangsar South from Distinctive Acre. This related party transaction between UOA subsidiaries was transacted at MYR 955 per sq ft, below its valuation price at MYR 980 per sq ft. Meanwhile, JD Hospitality acquired Menara MIDF in Jalan Raja Chulan from PNB at MYR 875 per sq ft. The property is reportedly to be repurposed to a hotel. Outlook: Economy set to rebound and improve market sentiment Recovery of the office market depends greatly on the economy and the influx of new investment. The economic consensus across the board predicts Malaysia’s growth to range from 5.2% to 7.5% in 2021. However, FDI in the service sector fell sharply, with a drop of -90.9% y-o-y, to only MYR 2.17 billion between 1Q-3Q20, which could lower office space take-up from multinationals in the near term. More fitted-out units will be available in the market, offering more choices to tenants at lower costs. E-Commerce, logistics and tech sectors are expected to perform well. The Malaysia Investment Development Authority is proactively seeking more MNCs to relocate their operations to Malaysia, by promoting its competitive edge with some of the lowest rents and capital values in the region.  

Only 170,000 sqm of Grade A buildings were completed in 2020.

Net absorption reached 2.2 million square meters.