Malaysia seen to face office space glut

Malaysia seen to face office space glut

KUALA LUMPUR (AFP): The Malaysian property market is expected to face a glut in the office and retail sectors following the completion of some major projects this year, analysts said yesterday.

"The office sub-sector is set for an oversupply situation, with more than 10.5 million square feet (900,000 square meters) of new office space flooding Kuala Lumpur this year," Victor Wan, property analyst with South Johor Securities, told AFP.

The mammoth Kuala Lumpur City Center project will be the largest office space supplier offering four million square feet (360,000 square meters), Wan said.

The project's landmark 88-story Petronas Twin Towers owned by state oil company Petroliam Nasional Bhd. is slated to be ready by the third quarter of this year.

Another 8.7 million square feet (783,000 square meters) of office space will be made available next year, increasing total office space in 1998 to 70. 5 million square feet (6.35 million square meters), he added.

Rentals are expected to ease, with rates for prime office space moderating from six ringgit (US$2.4) to around four ringgit ($1.6 dollar) per square foot (0.09 square meters), Wan said.

The retail property market in Kuala Lumpur is witnessing a shift to suburban development with a focus on leisure, said Zaki Said, executive chairman of property consultant Raine and Horne International Zaki and Partners.

Supply of retail space in the city center is expected to almost triple to 9.528 million square feet (857,520 square meters) by 1999 from 3.34 million square feet (300,600 square meters) this year, Zaki told a seminar on the property outlook for 1997.

The bigger supply will lead to lower or more competitive rentals, he said.

"Large volume of foreign tourists to Malaysia and increased spending in the Malaysian market will be the antidote towards the impending glut of shopping centers," he added.

Zaki dispelled fears of a slowdown in the property market after the end of the 1998 Commonwealth Games here as the sector had defied the norms by recording eight straight years of continuous growth.

"The property market is the last to suffer during hiccups of the economy," he added. Builders are rushing to complete some major projects to tie up with the 1998 Commonwealth Games to be hosted by Kuala Lumpur.

"Overall, we expect the property sector to be mixed this year as buyers become more selective and more affluent," another analyst said.

With the moderating interest rates, low-to-medium cost housing developers with projects in well located areas will benefit the most, he said.

But demand for high-rise residential units and "lifestyle" properties would remain lukewarm due to increasing supply.

Chief executive officers (CEOs) polled by property consultant CH Williams, Talhar and Wong (WTW) said the overall Malaysian property market was likely to consolidate this year.

A "majority of the CEOs believe the property market in 1997 will be stable, except for concerns over a surplus in the offices, apartments, country homes, hotels and golf resort sub- sectors," said John Loh, managing director of WTW.

Most of the chief executives ranked interest in the conventional housing sector including bungalows first among local investors while the industrial sector was ranked top among foreign investors, Loh said.