PETALING JAYA: Unless they have the financial muscle, commercial and industrial property owners are selling their assets to generate cash, reduce debts or fund expansion, property consultancies say.
Henry Butcher chief operating officer Tang Chee Meng (pic) said owners may have a change of direction after an acquisition due to changes in market conditions.
Some may have bought an office building to convert it into a hotel, but have since changed their strategy, said Tang.
Others are forced to sell to improve cash flow or raise capital.
“When companies are unable to meet profit forecasts or generate enough cash flow to comfortably fund their business activities, we may see more of them carrying out disposals of buildings/land, ” he said in an email reply.
“This may develop into a nation-wide trend if business conditions become more challenging, but we reckon that most of the transactions would be focused on the main cities of Kuala Lumpur, Petaling Jaya, Johor Baru and Penang, ” he said.
Who the new buyers are will depend on location, type of property and transaction amount.
“Transactions which involve huge sums will not be within the appetite of local players at this point in time, ” said Tang.
Property consultancy JLL Malaysia concurred that there has been an observable trend of more office buildings and industrial properties being put up for sale of late.
The trend is expected to continue. JLL is active in the office market.
JLL’s research and consultancy director Veena Loh said those with the financial strength may opt to enhance their assets. Closed-end private equity funds put up the assets for sale before the fund expired.
“These disposals would have been envisaged as part of the exit strategy even during the acquisition stage, ” said Loh.
“The majority of owners are disposing to generate cash, settle debts or fund expansion, ” she said.
Instead of taking up the challenge to “reposition and rebalance their portfolios in accordance to their asset management strategies”, they decide to take the sale route, said Loh.
“Quite a number of occupiers have, or are relocating, to newer buildings. Some have found a new place to base their headquarters, ” said Loh.
The trend is most observable in the Klang Valley and Johor, said Loh, while her counterparts said they have observed this in Penang as well. Industrial sales are observed in Penang and Johor.
“Price expectation has moderated in KL. The type of commercial assets being put up for sale are in the average price range of RM780 per square foot (psf) to RM1,200 psf, ” Loh said.
“The drop in price was most evident in 2015-2016 when the eventual transacted price versus the original asking price actually posted a difference of between 25% and 30%.
“Subsequently, the average transacted price has been stable for the past couple of years.”
Loh said capital values in the city have remained stable in the past few quarters.
PPC International managing director Datuk Siders Sittampalam said: “Usually, when the sector is not performing well, owners would tend to sell or they may sell to unleash cash in order to restructure their financial position.
“For the industrial sector, owners are selling not because the market is bad. Some of the REITs are buying these on a sale-and-leaseback basis for a specific return on their investments, ” Siders said.
“The industrial market is relatively still performing well, ” he said.
As for the office market, the smaller office buildings which are not as competitive as the newer buildings are “surfacing” in the market.
“This means rental of small buildings will come down. If you have all the facilities within a building, tenants will go for that type of buildings, ” he said.
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