Expert: Developers, owners in control of office space supply

KUALA LUMPUR: Property consultancy C H Williams Talhar & Wong said the supply of Klang Valley office space for this year may not be as daunting as earlier thought “due to control by developers and owners”.

“We may have an oversupply in terms of planning but the developer or owner can control the situation. They can slow down or pause, which they did last year,” said C H Williams managing director Foo Gee Jen at the launch of the WTW Property Market 2014 report yesterday.

Foo said there was a total of 92.7 mil sq ft of office space in the Klang Valley last year. A total of 3.3 mil sq ft of office space was completed last year with a take-up rate of 3.1 million sq ft.

A new vacancy of 200,000 sq ft was “not frightening”, Foo said.

He expects a total of 6.75 million sq ft to be completed in 2014 and 1.45 million sq ft in 2015, a total of 8.21 million sq ft. Assuming a constant take-up rate of about 3 million sq ft for each year, that leaves a balance of about 2 million sq ft, or four buildings. (An office building has an average space of about 500,000 sq ft.)

“That is not frightening. So I am not as negative as most (property consultants),” he said.

For the past 12 months, property consultants had raised red flags about the glut of office space.

Last year, another property consultancy said the Klang Valley had more than 100 million sq ft of office space, exceeding the supply in Jakarta, Singapore and Bangkok.

On the difference between WTW’s 92 million sq ft and the 100 million-sq-ft milestone, Foo says each consultancies had different definition of purpose-built office space.

On government projects like Bandar Warisan and Tun Razak Exchange Square adding to the glut, he said the owners and developers could control the situation.

“If there are no tenants, building owners and developers do not have to build,” he said, adding that yield was hovering around 6% or slightly above RM6 per sq ft, what Foo called “the effective rent”.

“What you sign up for (in a contract, known as the asking rent) and what you actually pay (the effective rent) is different,” he said.

Foo is bullish about the industrial property sub-segment and said this sub-segment of the property market is the best performer in terms of price appreciation and yield.