Office rental rates to remain stagnant

WTW says with the additional 5.89 million sq ft by year-end, it will continue to be a tenants’ market.

PETALING JAYA: Rental rates for office space in the Klang Valley is expected to remain stagnant in 2015 due to anticipated incoming supply of nearly six million sq ft this year.

According to CH Williams Talhar & Wong’s (WTW), with the additional 5.89 million sq ft by year-end, it will continue to be a tenants’ market.

“However, better quality buildings (such as the Multimedia Super Corridor and green building accreditation) are anticipated to continue to achieve premium rentals.”

WTW added that in terms of the investment environment, the economic uncertainties in Malaysia and in the European countries, as well as the slower growth in China and other Asian countries, gave negative signals to foreign investments into Malaysia.

“With the large supply of office space, it is expected that take up will be slow particularly in Kuala Lumpur, which depends on multi-national companies’ demand for space.”

Savills Malaysia executive chairman Chris Boyd said there would be more supply this year compared with a few years.

“The market has been affected by the withdrawal of oil and gas companies (O&G) that were looking to take up office space here. However, we believe that won’t last forever and they should be back next year.”

Boyd, however, pointed out that there was “unprecedented demand” from foreign companies looking to set up call centres, back offices and service centres in the country.

“These are big space-takers looking for office space but at reasonable prices. Where we lost out from the O&G tenants, we will make up with those looking to set up their call centres, back-up offices and service centres.”

Among the office buildings that are expected to be completed this year are Menara TH @ Platinum Park, Naza Tower @ Platinum Park, IB Tower, Menara Bangkok Bank, Solaris Sultan Ismail, KL Trillion, Quill 15 @ Vision City, Q Sentral (Lot B, KL Sentral), The Ascent @ Paradigm Mall, The Prime @ Altium and the MKN Embassy Techzone.

WTW noted that the general office market in the Klang Valley remained stable, hovering at 84% during the second half of 2014.

“Kuala Lumpur had experienced a marginal decline in occupancy rate of 0.5% (it stood at 86.5% and 87% in the third and second quarters respectively) and remained stable in the fourth quarter of 2014.

“In terms of space taken up, the overall market in the Klang Valley had experienced slow take-up rates, registering at about 240,000 sq ft during the second half of 2014 compared with a total net-take up of about 1.57 million sq ft during first half of 2014.”

WTW added that average prime rental and capital value, particular within the Kuala Lumpur market, was expected to continue to remain stable at RM6.80 per sq ft (gross) with yields ranging between 5.8% and 6.5% respectively.