Vacant office space poser after relocation to TRX

ACCORDING to the Tun Razak Exchange (TRX) website, “marquee status companies” licensed to operate in certain financial services sub-sectors will enjoy a slew of incentives.

These include retail and/or merchant banking, insurance, Islamic banking, Takaful operators and capital market services.

The word “marquee” denotes a tent-like covering. Therefore, this special covering is extended over companies operating in Malaysia’s development of the financial district.

The incentives include tax deduction for relocation costs, rental expenses on TRX premises for up to 10 years, various stamp duty remission for rental/purchase, property loans and service agreements.

Property consultants are promoting TRX based on these incentives, that those who qualify may enjoy reduce rental and operational expenses by up to 20%.

Against the supply of office space which totals more than 120 million sq ft in the Klang Valley, the oversupply has inevitably led to overall average vacancy of about 20%. This has put pressure on rental rates with tenants in existing buildings moving to newer ones to take advantage of better quality buildings without having to pay much more.

So what will happen to the vacuum left behind as companies relocate to TRX?

The situation is exacerbated by about 5 million sq ft of space expected to enter the market annually in the next four years while the annual average take-up rate is about 2 million sq ft.

Last year, the take-up rate was 1.2 million sq ft compared with 700,000 sq ft in 2016, due mainly to the oil price plunge.

Savills Malaysia executive chairman Christopher Boyd says that other than refurbishments, some of these buildings may experience a change in usage.

“Some of them may never be office buildings again,” says Boyd. — By Thean Lee Cheng