ABOUT a year ago, the Covid-19 pandemic ended up drastically changing working practices, with the concept of working-from-home (WFH) becoming the new norm.
The office property market, which was already facing an oversupply situation for years, was hit with another huge blow by the pandemic.
A year on, while the world is still in the thick of arguably its worst health crisis in a century, the outlook is looking less bleak as countries all over the globe have either started or will commence rolling out their vaccine initiatives.
For the office property market, does this mean there will be an imminent light shining at the end of the tunnel?
Rahim & Co International Sdn Bhd real estate agency chief executive officer Siva Shanker has always felt that the concept of WFH “doesn’t really work”.
“It only works when your job is structured and measurable and you have access to everything in your Cloud, ” he tells StarBizWeek.
Siva goes on to explain that many multinational companies have been practising a “hybrid” form of WFH for years.
“That’s because the work can be structured and measured. If it’s not, it’s only human nature to become more relaxed in a relaxed environment.
“When that happens, productivity drops and work becomes compromised.”
Siva admits that while WFH is definitely the more preferred option, especially in a pandemic, he adds however that the format is not without its flaws.
“Today, everyone is so excited to have Zoom meetings. But in a typical virtual meeting of say, 20 people, 12 are just bystanders. You’re not building contacts or relationships, which you can do in a physical meeting.
“Also, during an average one-hour meeting, the first half-an-hour is often spent sorting out bugs, glitches or ensuring that everyone has successfully joined or logged on.”
Siva firmly believes that a lot of firms will go back to working from an office space once the pandemic has been successfully contained.
“I believe that most companies will go back to working from their offices once they are comfortable about doing it.
“Going forward, office space will still have a role to play, just with different requirements.”
Siva says a company occupying a large office space prior to the pandemic may downsize after realising that they may not need large working spaces anymore.
“They may realise that not everybody needs to be in the office at the same time. On the flip side, a company that’s been occupying, say 8,000 sq ft of space before, may upgrade to a larger premise of maybe 10,000 sq ft for social distancing purposes.
“At the end of the day, I believe they will balance each other out, when it comes to demand for office space.”
Skillsoft Asia Pacific human resources senior manager Katie Amin says businesses have to balance the rights and wishes of their employees with ensuring a safe workplace for all employees, as the vaccine rollout begins.
“Businesses may want to consider alternatives to vaccine mandates. For example, a robust education campaign, enhanced paid time off for the vaccination and company leaders taking the vaccine first to demonstrate safety of the vaccine.
“Employees need to understand the reasons why you’re asking them to get a vaccine and what the alternatives are if they refuse.”
She adds further that it is important to put processes in place, so that if an employee does refuse the Covid-19 vaccine, they will understand what action will be taken and how their decision might impact their role.
“Ensure your team knows what these processes are by providing them with engaging health and safety training, so they understand the potential risks of Covid-19 and the measures they need to comply with to protect them and their colleagues.
“Lastly, it is important to respect every individual and make decisions on a case-by-case basis. If an employee isn’t comfortable coming back to the office for example, it is important that employers can be flexible and adaptable to allow them to continue to work from home.”
Meanwhile, Knight Frank Malaysia corporate services executive director Teh Young Khean says the pandemic will potentially switch the workplace trend from a centralised model to a virtual model in the future.
“Organisations that have been adopting hybrid working models since the start of the movement control order may find this model beneficial and consider it as a go-to model moving forward. The office space function may change to support this arrangement by providing a ground for physical interaction and collaboration among the employees when required.
“The office is here to stay with a tweak to its purpose. We will also see enhanced office quality and better floor configuration where health and safety will remain top of mind for occupiers.”
Knight Frank Malaysia capital markets executive director James Buckley says investors have shied away from buying second-hand space that comes with more risk, as tenants relocate to better quality new office accommodation.
“These second-hand buildings are finding it hard to compete for tenants who are upgrading to new offices in KL city and KL fringe locations. Older office buildings will see their prices continue to soften and in some cases, will need to be repurposed into other uses.
“For those investors looking to acquire institutional quality income producing office assets, there are few good options to choose from.”
For the Penang market, Buckley says the office sector occupancy has continued to remain strong amid the pandemic.
“The average occupancy rate for four prime buildings monitored in George Town remained at 89%, while the average occupancy rate in Penang state continued to hold steady at 78.2% as at the third quarter of 2020.”
Additionally, Knight Frank Penang executive director Mark Saw says Penang, being the second most attractive location in Malaysia after the Klang Valley for placement of MSC companies, continues to see the state government taking proactive initiatives to develop global business services (GBS) buildings.
“Penang now has two GBS centres, namely GBS@Mayang that was completed in 2018 and located in Banyan Baru; and GBS@Mahsuri, a newly completed 80,000 sq ft, two-storey development that is fully occupied.
“Buildings with the MSC Cybercentre Status recognition by the Malaysia Digital Economy Corp will continue to be well sought after, ” he says.
Meanwhile, CBRE|WTW in its Market Outlook Report 2021 says companies will strive to revert to pre-Covid-19 business levels, adding that weakened office space demand is expected to be reflected in softer rentals and yields.
“Businesses are becoming more cost-sensitive as challenging conditions persist, thus impacting on their leasing decisions either by consolidation, space reduction or lease termination.
“Lease commencement and new leasing have been deferred. Re-negotiation and evaluation of decisions have slowed down leasing activity. New completions and renovation works are being delayed.”
It adds that health, standard operating procedures and financial concerns have pushed companies and industries into restructuring, technology advancement, remote working and also improvement of office layout and workflow.
“Workplaces are trending away from private cubicles to shared and collaborative spaces. Selected landlords are converting and offering flexi space or short-term leases.
“The flexi working space trend could spur the growth of co-working space in the Klang Valley, not only catering for small and medium-sized enterprises but also large corporations. Offices are also being dispersed to less dense and alternate locations.”
In order to practise social distancing in the current situation and the rapidly changing workplace, CBRE|WTW says offices are still trending away from private workplaces to collaborative spaces.
“Selected landlords are offering under-used fitted units into flexi space or short-term leasing of six-to-12 months.
“Many tenants are reviewing their leasing agreements with the landlords which may impact rentals and future leasing terms. Those resilient sectors such as pharmaceuticals, information technology or fintech and e-wallet providers may be the better tenants to target.”