PETALING JAYA: The rout on oil prices, the Klang Valley’s oversupply of office space and the overall soft property market have compelled developers to change tactics when selling their buildings.
The rental market also found itself in a similar situation, where office building owners are lowering their rental to retain tenants or extending rent-free periods to potential tenants.
Oxley (Malaysia) Sdn Bhd, a subsidiary of Singapore developer Oxley Holdings Ltd, which will be commencing the development of Oxley Towers KLCC this year, will be selling its office space in Oxley Towers KLCC on individual unit basis instead of en bloc as planned initially, Oxley Malaysia CEO Datuk Othman Omar (pic) told StarBiz.
“The absolute price of the smaller units of 645 sq ft will be slightly above the RM1mil range. That will be an attractive proposition for this address,” he said.
He said the company had a few enquiries to sell its 29-storey office block, with a gross floor area of 346,000 sq ft, en bloc initially. However, in view of the general weak sentiment in the oil and gas (O&G) sector, soft property market and the oversupply of office space in the Klang Valley, the company is opting for the strata route.
Had it opted for the en bloc route, the price would be cheaper on a per-sq-ft basis, but the outlay would be high.
BlackRock, the world’s largest asset manager, took about a year to sell its 39-storey Integra Tower, a Grade-A office building, with a net lettable area of 760,715 sq ft and 850 parking bays. It finally sold it to Retirement Fund Inc (KWAP) for RM1.065bil in April last year.
Most developers and landlords of top-grade city offices have eyed companies linked to the O&G sector and multinational companies by offering large open floor areas. Because the O&G avenue has somewhat dimmed – O&G companies do not need that amount of top-grade office space at the moment – this previous heavy focus may be hurting the office market.
Said Othman: “When we sell individual units, we need not follow set specifications as when it is sold en bloc. If purchasers need more space, they can combine a few units,” he said.
“There is a lack of smaller-sized top-grade strata offices in the KLCC area. Oxley Towers KLCC can meet this demand,” he said.
The prices per sq ft may range between RM1,800 and RM2,000. Prices had not been confirmed, Othman said. This works out to 645-sq-ft units being priced at above RM1mil.
Othman said Oxley Malaysia is working with lending institutions to offer a 150% financing package. It will occupy two floors in the 29-storey block which has a gross development value (GDV) of RM450mil.
The other two blocks will comprise two hotels and their respective serviced apartments and two retail floors. Dubai-based hotel group Jumeirah will operate a luxury-class 181-room hotel on a 49-storey block located above 267 serviced apartment units. They are planning to launch it in Dubai first this year.
“People from the Middle East like to invest in Malaysian properties. They prefer branded residences. They will be familiar with the Jumeirah brand,” he said.
The third and tallest block, at 78 storeys, about 10 storeys short of the 88-storey Petronas Twin Towers, will house French boutique hotel Sofitel So. It will operate 207 rooms located below 590 serviced apartment units. The mixed project is expected to be completed in 2021.
Veritas Design Group, which won the project through an international competition, said Oxley Towers would add a new dimension to the area with its songket-weaving facade.
Veritas president David Mizan Hashim said: “It will be a recognisable visual cultural identity to the local traditional craft motifs.”
Oxley had a 50% discount off its development charges from KL City Hall, a savings of about RM50mil on condition that it begins work within six months.
Hashim said: “City Hall wants to encourage development projects to go on. This 50% discount offer started around September 2015 to spur the soft market because developers were slowing down.”
He said developers, on getting their development order, tend to delay their projects and City Hall did not want them to do that.
Oxley bought the land, currently occupied by Pelita Nasi Kandar, from the Loke Wan Yat estate for some RM450mil, or a record RM3,300 per sq ft. The prime freehold land with Jalan Ampang frontage has an estimated GDV of RM3bil.
Oxley also has a project in Section 16, Petaling Jaya next to the Phileo Damansara Trade Centre. It submitted its application for development order in mid-March for an RM800mil-GDV mixed project comprising serviced apartments, a hotel, small offices home offices and corporate offices on five acres. The plot ratio for this Section 16 project is 3.99, whereas its KLCC project has a plot ratio of 13.99. The higher the permissible plot ratio, the higher the structure permitted by the authorities.