The survey - Malaysia Commercial Real Estate Investment Sentiment Survey (CREISS) 2017 - takes a litmus test of insights and preferences of key players, namely developers, fund / REIT managers and lenders in the commercial sector for the year 2017.
Knight Frank Malaysia managing director Sarkunan Subramaniam said: “This survey predicts the commercial real estate outlook based on sentiments of industry players. Both office and retail markets will continue to be under pressure with rental and occupancy due to oversupply. While the logistic / industrial sub-sector is expected to gather pace in 2017 with the growth of e-commerce driving the demand for logistic / industrial space.
“Despite the challenging operating environment, the respondents have express their interest in exploring investment opportunities in various regions. Sabah and Penang were voted as the highly attractive regions for hotel / leisure investment, likely attributed to their strong tourism market.”
Respondents from senior management levels this year consists of developers (77%), fund/REIT managers (16%) and lenders (7%). There was an increase of interest in the healthcare/ institutional sub-sector among developers in 2017, 11% more appear to be more interested as compared to 2016.
Lenders would continue to provide financing for the retail and office sub-sectors although the lending guidelines may be more stringent now, the survey noted. It also showed fund / REIT managers are switching their investment focus to logistics/ industrial sub sector as growth in e-commerce drives demand for logistics/ industrial space.
Kuala Lumpur remains the top choice for commercial investment / development (29%), followed by Selangor (23%), Penang (17%), Johor (20%) and Sabah (11%). When compared to 2016, respondent’s interests in the capital city have waned marginally for the year ahead. More respondents are looking to diversify their investments to popular and upcoming regions such as Penang, Johor and Sabah.
The survey revealed that office and retail sub-sectors in Kuala Lumpur would continue to be active. Johor and Selangor would continue to attract industry players for the logistics/ industrial sub sector.
With 26% responses, Penang remain the top pick for hotel / leisure sub-sector. The healthcare / institutional sub-sector in Johor garnered 36% responses likely attributed to the growing industry and potential spillover from Singapore – Johor offers affordable quality healthcare.
The survey also showed the favourable and unfavourable factors affecting commercial real estate investment sentiment. The on-going MRT and other road and rail infrastructure works remain as top favourable factor for the past three consecutive surveys.
Second favourable factor was the availability of good stock / investment opportunities. The availability of equity capital / fund are expected to be a less favourable factor in 2017 due to growing uncertainties in the global and domestic economy.
Among others, the majority of the respondents expects the capital values for all sub-sectors in 2017 to hold steady. Thirty two percent of the respondents expect healthcare/ institutional to increase.
More than 50% of the respondents expect rental reduction in office and retail sub-sectors and 70% of the respondents expect stable rentals in the logistics/ industrial sub-sector.
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