RESEARCH REAL ESTATE HIGHLIGHTS 2ND HALF 2018
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KUALA LUMPUR PENANG JOHOR BAHRU KOTA KINABALU HIGHLIGHTS KUALA LUMPUR HIGH END CONDOMINIUM MARKET There were noticeably more completions and launches during the review period. ECONOMIC AND MARKET 53,033 units following the completion of INDICATORS four projects during the review period. They are Ruma Residences (199 units), Prices of high-end condominiums Malaysia’s economy recorded sustained Pavilion Suites (383 units), Premium / serviced apartments remained growth at 4.4% in the 3Q2018 (2Q2018: Residences @ KL Gateway (466 units) resilient in the secondary market. 4.5%), driven mainly by expansion in and Dorsett Residences Sri Hartamas As for the lettings market, there domestic demand and higher private (707 units). was a marginal rental decline in investment. The country’s GDP for the Damansara Heights. whole year of 2018 is expected to be in By 1H2019, the scheduled completions the region of 4.8%. of Inwood Residences @ Pantai Sentral Park (211 units), One Kiara – Block A Slight upward revision in stamp The headline inflation at 0.5% in 3Q2018 (118 units), Residensi Sefina (245 units) duty and real property gains tax was the lowest since 1Q2015 (0.7%) and Opus KL (357 units) will collectively (RPGT) rates as announced in following the 3-month tax holiday from contribute an additional 931 units to the Budget 2019 unlikely to have June until September. Overall headline existing stock. significant impact on the high- inflation is expected to ease to 2.0% this end condominium market. year (2017: 3.7%). During the review period, there were noticeably more previews and launches The labour market conditions continued compared to 1H2018. Notable project The mass and affordable housing to remain favourable with unemployment launches include Agile Bukit Bintang segments will kick-start the rate at 3.4% in 3Q2018 (2Q2018: 3.3%). (Block B) and Yoo8 of 8 Conlay (Block residential market moving into During the review period, the central B) in KL City; Windsor Suites @ Pavilion 2019, supported by various bank kept the Overnight Policy Rate Damansara Heights and; Trinity exemptions and initiatives under (OPR) unchanged at 3.25% to remain Pentamont and Residensi Astrea in Mont’ Budget 2019. accommodative and supportive of Kiara. current economic activity. Agile Bukit Bintang, a project that is More launches of high-end SUPPLY & DEMAND jointly developed by Agile Group and residential products in the Tropicana Corporation Berhad, features pipeline with improving market The cumulative supply of high-end three residential towers offering a total sentiment. condominiums / residences stood at of 1,501 units, 66 SOVO units and 14
Malaysian buyers are becoming FIGURE 1 more discerning while foreign Projection of Cumulative Supply for High End Condominiums / buyers find our residential Residences 2014 – 1H2019 (f) products attractive for investment purpose due to the country’s 60 liberal ownership policies and 50 with no additional stamp duty.
40
30
20
10 Cumulative Suppl y (No. of Units (’000)) 0 Year 2014 2015 2016 2017 1H2018 2H2018 1H2019(f)
KL City Ampang Hilir/ U-Thant Mont’ Kiara/ Hartamas Bangsar/ Damansara Heights Notes: (1) (f) = Forecast (2) The locality of Bangsar includes Bangsar, Bangsar South, KL Sentral, KL Eco City and Pantai Sentral Park Source: Knight Frank Research
2 REAL ESTATE HIGHLIGHTS MALAYSIA
parcel. To date, three residential towers, TABLE 1 namely Private Residences, Service Completion of High End Condominiums / Residences 2H2018 Suites 2 and Windsor Suites (formerly known as Service Suites 1) have been Project Location Area Total Units unveiled. Windsor Suites, the latest tower previewed on 20th October 2018, The Ruma Residences Jalan Kia Peng KL City 199 offers 568 units of one to four-bedroom Pavilion Suites Jalan Bukit Bintang KL City 383 serviced residences with typical sizing Premium Residences Bangsar South Bangsar 466 ranging from 614 sq ft to 1,831 sq ft and @ KL Gateway penthouse sized 6,483 sq ft. The selling Dorsett Residences Sri Hartamas Mont' Kiara / 707 prices range between RM1,700 per sq ft Sri Hartamas Sri Hartamas and RM2,116 per sq ft. Source: Knight Frank Research PRICES AND RENTALS
Secondary pricing of high-end commercial lots. Launched in June 2018, condominiums / serviced apartments in the first phase saw the unveiling of Tower the selected localities under review were B, a 60-storey building comprising 21 SOVO units and 678 semi-furnished generally flat. As for the lettings market, residential units that come in six layouts there were marginal dip in rentals of with built-up areas ranging from 625 sq ft selected schemes reviewed in the locality to 1,157 sq ft. The units are priced from of Damansara Heights. RM1.1 million onwards with completion Typical units sized between 1,000 sq expected by 4Q2022. ft and 1,400 sq ft at Marc Serviced KSK Land previewed Tower B, its second Residence and The Troika were transacted at around RM1,250 per sq ft branded residence tower of Yoo8 @ 8 Pavilion Suites Conlay in July 2018. The 57-storey Tower and RM1,500 per sq ft respectively. B which was launched recently features notable integrated developments that Meanwhile, in the primary market, 498 units of branded residences with have been in the watch list since they available units of selected schemes sizing between 705 sq ft and 1,328 sq ft were unveiled in 2016. Both projects launched previously, namely 8 Kia and priced from RM3,260 per sq ft. The have continued to launch their residential Peng, Eaton Residences and Lucentia units are designed by UK-based interior products braving the prevailing weak Residences @ BBCC are selling from designer, Kelly Hoppen. market condition in the high-end segment. about RM1,500 per sq ft to RM1,950 per Trinity Group Sdn Bhd has launched its sq ft for units sized below 1,000 sq ft. residential project in Mont’ Kiara named BBCC, which sits on a 19.4-acre prime Schemes launched recently are observed Trinity Pentamont in September 2018. address in KL City, is a joint development to have higher composition of units with The 41-storey condominium sits on a by UDA Holdings Bhd, Eco World and smaller built-up area below 1,000 sq ft, 2.9-acre freehold site and offers 330 EPF. To date, the project has unveiled resulting in lower quantum pricing but condominium units comprising 300 dual- its initial phase comprising the Mitsui higher price on per sq ft basis. key and 6 penthouse units sized from Shopping Park Lalaport KL Mall, 1,379 sq ft to 4,115 sq ft. The units come Canopy by Hilton Hotel, the lifestyle In contrast to KL City, the latest launches with at least two car park bays and are street and landscape podium, transit in Mont’ Kiara namely Trinity Pentamont priced from RM640 per sq ft. Slated for and entertainment hubs, The Stride and Residensi Astrea offer larger units completion by 2022, the project features strata office and Lucentia Residences sized above 1,300 sq ft with selling prices penthouse-style units targeted at the (Residential Suites 1 and 2 with total of from RM640 per sq ft and RM800 per sq upper-middle class families with children 666 units). The upcoming phase will kick- ft respectively. and upgraders. start with the third serviced apartment As for the remaining units of schemes block in 2019, focusing on different Officially launched in October, Residensi launched in 2016 and 2017 such as Arte target market. Other components in Astrea by UEM Sunrise is a 37-storey Mont’ Kiara and Solaris Parq Residensi, Phase 2 include two blocks of serviced project featuring 240 condominium units. the selling prices are between RM900 per apartments and the BBCC iconic Available in six layouts with built-up areas sq ft and RM1,350 per sq ft depending 80-storey signature tower. from 1,364 sq ft to 1,859 sq ft, the units on the scheme, built-up area, floor level are priced between RM1.2 million and Meanwhile, Pavilion Damansara Heights, and other factors. The remaining units RM1.7 million. The freehold residential the rejuvenation of the former Pusat at Arte Mont’ Kiara and Solaris Parq project is targeted for completion by Bandar Damansara, will feature nine Residensi, both forming part of larger 1Q2023. office blocks, retail space and circa integrated developments, command Bukit Bintang City Centre (BBCC) and 1,300 residential units with sizes ranging higher selling prices (on per sq ft basis) Pavilion Damansara Heights are two from 600 sq ft to 2,800 sq ft in the first due to their smaller unit sizing.
3 TABLE 2 Notable Launches in 2H2018
Pavilion Name of Agile Bukit Bintang YOO8 Damansara Heights Residensi Astrea Trinity Pentamont Development - Block B - Block B - Windsor Suites
Type Serviced Apartment Branded Residence Serviced Apartment Condominium Condominium
Tenure Freehold Freehold Freehold Freehold Freehold
JV between Impian Ekspresi Modern Pandora Milik Harta Sdn Bhd Agile Group and Sdn Bhd Sdn Bhd Developer KSK Land Sdn Bhd (Subsidiary of Tropicana Corporation (Subsidiary of (Subsidiary of UEM Sunrise) Berhad 1 Pavilion) Trinity Group) Mont' Kiara / Mont' Kiara / Area KL City KL City Damansara Heights Sri Hartamas Sri Hartamas
No. of Units 678 498 568 240 330
Unit Sizing 625 - 1,157 sq ft 705 - 1,328 sq ft 614 – 1,831 sq ft 1,364 - 1,859 sq ft 1,379 – 4,115 sq ft (Min - Max) RM1,839 - RM2,107 RM3,262 - RM3,464 From RM1,700 From RM800 From RM640 Selling Price per sq ft per sq ft per sq ft per sq ft per sq ft
Source: Knight Frank Research
OUTLOOK are unlikely to have significant impact further assist first time homebuyers. on the high-end condominium sector Although lauded, it is imperative that the Market sentiments have improved although the acquisition and disposal innovative financing platform is governed since the formation of Malaysia’s costs in property transactions may be by stringent guidelines across the entire new government in 2Q2018. In Kuala higher. ecosystem to avoid potential sub-prime Lumpur’s prime housing market, prices mortgage crisis moving forward. are generally holding firm. Looking In contrast, the exemptions and ahead, the widening gap between supply initiatives, in particular the waiver of The recent gazetting of the long awaited and demand coupled with rising financing stamp duty on the instrument of transfer Kuala Lumpur City Plan (KLCP) 2020 is cost will continue to impinge on price and loan agreement for residential positive and will provide more clarity to growth as the market finds its equilibrium. homes valued up to RM300,000 for a developers and investors alike. 2-year period and the 6-month waiver of However, with property developers With improved transparency and stamp duty charges for properties priced generally more optimistic about the accountability in the new government, from RM300,001 to RM1.0 million, are market outlook, we expect to see more the outlook for the Kuala Lumpur high- expected to kick-start the housing market launches moving into 2019 and beyond. end condominium market remains one moving into 2019 and beyond. The slight upward revision in the rates of of cautious optimism with window of real property gains tax (RPGT) and stamp The introduction of alternative financing opportunities for recovery in the mid to duty as announced under Budget 2019 through ‘Property Crowdfunding’ will longer term.
TABLE 3 Average Asking Prices and Rentals of Existing High End Condominiums 2H2018
Ampang Hilir / Damansara KL City* U-Thant** Heights*** Kenny Hills Bangsar Mont' Kiara**** 2.20 - 5.20 2.00 - 3.50 2.20 - 4.00 2.00 - 3.00 2.40 - 4.00 1.80 - 3.50
700 - 1,700 550 - 1,200 550 - 1,000 550 - 900 700 - 1,300 500 - 850
Asking Gross Rental Average Asking Price (RM per sq ft) Decrease Stagnant * Excludes Pavilion Banyan Tree Signatures *** Excludes DC Residency and 10 Semantan ** Excludes Damai 88 **** Excludes Icon Residence, The Signature and Verve Suites Source: Knight Frank Research
4 REAL ESTATE HIGHLIGHTS MALAYSIA
HIGHLIGHTS KLANG VALLEY OFFICE MARKET
The overall occupancy recorded MARKET INDICATIONS marginal decline during the review period following Despite recording positive net completion of more new office absorption, the Klang Valley office market space while the average rental remained lacklustre during the review continued to hold steady as period as new completion continues to new buildings command higher outstrip demand. rentals. SUPPLY AND DEMAND
The cumulative supply of purpose- Co-working / shared services built office space in Kuala Lumpur and trend continues to gain Selangor totalled circa 103.17 million sq momentum. ft as of 2H2018 following the completion of six buildings with combined space of Dated office buildings in the approximately 1.84 million sq ft. city are expected to undergo The recent completion of Menara Khuan repositioning / upgrading Choo and Equatorial Plaza increased works to cater to the needs of the cumulative supply of KL City to occupiers. 52.35 million sq ft while in KL Fringe, the completion of Menara Etiqa and Menara Malaysia is ranked at 15th spot in Southpoint, brought its cumulative supply the World Bank Doing Business to 29.50 million sq ft. 2019 Report, second after In Selangor, the cumulative supply Singapore in the ASEAN region. increased to 21.32 million sq ft following Menara Etiqa completion of Nucleus Tower and Tower Source: Etiqa Life Insurance Berhad 6 of Sky Park.
Equatorial Plaza is a mixed commercial park and four levels of basement carpark. development that is located at the former Sandwiched between the podium car park Hotel Equatorial site on Jalan Sultan Ismail and serviced apartment component, is The 50-storey development houses 23 500,000 sq ft of office space with typical levels of Grade A offices and 22 levels of floor plate size of circa 20,000 sq ft. luxury hotel with excellent accessibility Nucleus Tower is a newly completed via dual frontages on Jalan Sultan Ismail Grade A office tower in Mutiara and Jalan Perak. The office component Damansara. The 25-storey tower offers provides net lettable area (NLA) of circa 238,000 sq ft of column free office approximately 460,000 sq ft, where 45% space with typical floor plate ranging of the space have been committed as of from 9,300 sq ft to 11,000 sq ft. December 2018. Office buildings slated for completion Menara Etiqa is a new corporate office in the next review period of 1H2019 tower that has Green Building Index include The Exchange 106 and Menara (GBI) Gold certification and is GreenRE Prudential in KL City; and Menara Star 2, Platinum rated. Located in Bangsar, 1Powerhouse and Symphony Square in opposite the LRT Station, the 38-storey Selangor. tower offers 379,000 sq ft of office space with typical floor plate measuring 13,000 During the review period, the overall sq ft to 14,000 sq ft. occupancy rate for KL City hovered The newly completed Menara Southpoint around 78.7% (1H2018: 79.0%). While is the final component of the Mid there were several tenant movements Valley City development. The 59-storey from Menara Citibank, Menara Dion integrated tower is made up of a grand and Rohas Purecircle, there were also double volume lobby, 27 levels of office new take-up at ILHAM Tower, Menara space, 22 levels of serviced apartments, a Worldwide and G Tower. grand ballroom, eight levels of podium car The overall occupancy rate for
5 decentralised office locations in KL Fringe tower atop a four-storey podium car park 23-storey Wisma MCA in Jalan Ampang, declined marginally to record at 82.2% and a three-storey basement car park Kuala Lumpur and build a 70-storey in 2H2018 (1H2018: 83.8%). Newly with 605 bays, will have gross floor area skyscraper with estimated gross completed buildings such as Menara (GFA) of approximately 825,000 sq ft. It is development value (GDV) of up to a RM1 Etiqa and Menara Southpoint have yet to scheduled to be completed by end 2020. billion. The new plans for an eight-storey achieve significant occupancy levels. basement car park, 27 floors of offices, a As for the 118-storey skyscraper of 328-room hotel on 24 floors and a two- As for the Selangor office market, the Merdeka PNB118 which offers a large storey sky lounge and restaurant on the overall occupancy rate for 2H2018 was floor plate measuring approximately 68th and 69th floors were approved by also slightly lower at 78.3% (1H2018: 20,000 sq ft, it is expected to appeal to Dewan Bandaraya Kuala Lumpur (DBKL) 79.2%). Similar to KL Fringe, newly larger corporations who wish to take up on 2nd August 2018. completed buildings, namely Nucleus the whole floor or several floors, while Tower in Mutiara Damansara and Tower for smaller occupiers, it will be possible Over in KL Fringe, WCT Berhad, a wholly- 6 of Sky Park in Cyberjaya, have yet to to sub-divide the space into quadrants. owned subsidiary of WCT Holdings Bhd achieve significant occupancy levels. Permodalan Nasional Bhd, the parent has secured a construction contract worth RM1.77 billion from Impian Meanwhile, notable work progressions company of PNB Merdeka Ventures Sdn Ekspresi Sdn Bhd for the execution and and office related announcements in Bhd will be taking up about half of the completion of nine blocks of office towers 2H2018 are summarised below. 83 floors of space in the building. The 3-phase project is expected to be fully and three blocks of serviced apartments In KL City, construction of the RM500 completed by 2024. on a podium block comprising retail million 27-storey office tower of Menara space, mezzanine floors and works to Prudential at Tun Razak Exchange (TRX) Meanwhile, Pesona Metro Holdings lower ground floor and basement car is 93% completed and is on track to be Bhd has secured a contract valued at park within the mixed-use commercial ready by 2019. The Prudential Group RM218.22 million from Pembinaan Kery development of Pavilion Damansara is expected to move in by 1H2019. Sdn Bhd, a wholly-owned subsidiary Heights. Construction is expected to be Committed occupancy is estimated at of Melati Ehsan Holdings Bhd, to build completed by end of 2021. approximately 85%. an office tower in Jalan Conlay. The 41-storey commercial tower will house State utility giant TNB is unlocking its On the other hand, IJM Corp Bhd has 32 levels of office suites, one level of assets by undertaking three development secured a RM505 million contract from projects fronting the main road of Jalan facilities, five levels of elevated car Affin Bank Bhd for the construction and Bangsar with a combined GDV exceeding park, and three levels of basement car completion of the superstructure works RM2 billion. Earth-clearing and piling park. Construction is expected to be of its headquarters on a 1.25-acre site works for all the three projects have completed by end 2020. at TRX. The 47-storey Grade A office started. The first project involves the tower, made up of a 43-storey office There are also plans to demolish the development of 3.76 acres at the corner
FIGURE 2 Occupancy and Rental Trends in Kuala Lumpur 1H2013 – 2H2018(P)
100 8
90 7 80 6 70 5 60
50 4
Occupancy (% ) 40 3
30 Rental (RM per sq ft / month) 2 20 1 10
0 0 1H2013 2H2013 1H2014 2H2014 1H2015 2H2015 1H2016 2H2016 1H2017 2H2017 1H2018 2H2018(p) Year
Occupancy (%) Rental (RM per sq ft / month) Note: (p) = Projected
Source: Knight Frank Research
6 REAL ESTATE HIGHLIGHTS MALAYSIA
of Jalan Bangsar and Jalan Pantai Baru, The group is also spending RM180 million single digit growth in rentals of selected facing the New Pantai Expressway. The on its elevated dispersal link, to connect good grade office buildings during second project, comprising four office 1Powerhouse to the old and new wings tenancy renewals. blocks with shared facilities and the Balai of 1 Utama Shopping Centre as well as The average achieved rental in KL City, Islam Centre, is within the compound of exits to Dataran Bandar Utama. This is to however, remained flat at RM7.15 per the existing TNB headquarters while the ease congested traffic flow in and around third project involves the development the popular shopping centre. The mixed sq ft as owners / landlords of newer of a complex for building generation on development is expected to be fully office buildings offer competitive rental about 14.0 acres, also in the locality of completed by 2H2019. and attractive tenancy terms to improve Jalan Pantai Baru. take-up. PRICES AND RENTALS See Hoy Chan Holdings Group has In Kuala Lumpur, well located Grade launched its RM1 billion 1Powerhouse During the review period, the average A office space continued to command project that will comprise some 450,000 achieved rentals for both KL Fringe and higher asking rents, ranging from RM6.00 sq ft of office space in a 31-storey tower, Selangor inched up marginally to record per sq ft to RM11.00 per sq ft per month 4-star Avante Hotel housing 640 rooms at RM5.75 per sq ft (1H2018: RM5.72 while in Selangor, the asking rents are and circa 500 parking bays to increase per sq ft) and RM4.22 per sq ft (1H2018: more competitive, ranging from RM4.50 the MRT station’s park and ride capacity. RM4.20 per sq ft) respectively following per sq ft to RM6.00 per sq ft per month.
Investment activities for office buildings TABLE 4 will continue to remain subdued moving Selected Grade A Office Asking Rentals 2H2018 into 2019. Asking Gross Rental Building Name (RM per sq ft / month) Fund managers / REITs are more cautious KL CITY in new office investments due to the Integra Tower 11.00 current oversupply situation. There are, however, investors who continue to seek Menara Maxis 10.50 pockets of opportunities in strategically Vista Tower 7.50 - 8.50 located prime office buildings. G Tower 7.50 A few notable office buildings were put up Menara Darussalam 10.50 for sale during the review period. Menara Binjai 8.80 Ahead of the completion of its new RM1 Menara Hap Seng 2 7.00 billion headquarters in the Tun Razak KL FRINGE Exchange (TRX), HSBC Bank Malaysia Menara Etiqa 7.00 - 7.50 Bhd has placed Menara HSBC South Mercu 2 / Mercu 3 6.00 - 6.50 Tower (which currently houses its main Axiata Tower 7.50 office) in Leboh Ampang up for sale. With 1 Sentrum 8.50 GFA of 238,000 sq ft and NLA of 173,000 sq ft, the 20-storey building may fetch Menara LGB 6.50 - 7.50 about RM120 million (RM693 per sq ft). The Gardens North & South Towers 7.50 Should a deal be completed speedily, Vertical Corporate Tower B 6.00 it will come with an initial guaranteed Menara BRDB 7.10 rental for the first couple of years, SELANGOR pending completion of the bank’s new 1 First Avenue 6.00 headquarters and relocation to TRX.
Surian Tower 5.50 Felcra Bhd is looking for potential The Ascent @ Paradigm 5.50 buyers for its Menara Felcra project Puchong Financial Corporate Centre (Towers 4 & 5) 4.50 at Jalan Sultan Yahya Petra which is The Pinnacle 5.50 50% complete. Felcra has already held discussions with several interested Wisma Mustapha Kamal 4.80 parties. Under the original development Quill 18 (Block B) 5.00 plan, Felcra as the landowner was not obligated to bear any of the costs for the project, but after the change in the contract with the original developer, WZR Source: Knight Frank Research Property Sdn Bhd, Felcra would have
7 to bear the full construction cost. The construction was subsequently taken TABLE 5 over by Felcra Properties Sdn Bhd due to Selected Notable Tenant Movements 2H2018 difficulties in obtaining financing for the Building Name Approx. Space (sq ft) Remarks project. KL CITY OUTLOOK Menara Standard ~29,300 Moving in The office market is expected to remain Chartered • Compass Offices vibrant in the KL Fringe area moving into JKG Tower ~14,000 Moving in 2019. • Sime Darby Lockton Insurance ILHAM Tower ~40,800 Moving in Due to the influx of new buildings, • Coway Malaysia particularly in TRX, occupancy rate in KL City is expected to decline marginally. KL FRINGE However, rental rates will continue to Menara ~80,000 Moving in hold steady as newer buildings tend to Southpoint • Garena Malaysia Shopee Malaysia command higher rental rates. • Mercu 3 ~135,000 • Moving in The trend of co-working and shared • Zurich Malaysia services is a sweet spot in the challenging • F-Secure Corporation (M) Sdn Bhd office market environment. Labelled “space as a service”, the rising popularity Mercu 2 ~46,600 Moving in of this market segment is demand driven • Gibraltar BSN Life Berhad by freelancers, start-ups and small and Menara KEN TTDI ~ 26,000 Moving in medium sized entrepreneurs (SMEs). • DKSH Global Corporate Services We will continue to see active take-up SELANGOR by co-working, shared services and IT UOA Business ~22,500 Moving in related industries. Park • WorQ Co-Working Space Dated but well located office buildings Source: Knight Frank Research such as Menara Weld, Menara Standard Chartered, Menara Maxis and Menara Milenium will reportedly be undergoing TABLE 6 repositioning / upgrading works to Selected Office Investment Sale 2H2018 improve their market competitiveness in Building Name Location Approx. Lettable Consideration terms of rental and occupancy levels. Area (sq ft) (RM per sq ft)
The new government’s concerted 1 Fujitsu Building Cyber 5, Cyberjaya 52,473 549 efforts to implement numerous regulatory reforms augur well for the Note: business operating environment and (1) Michaelian Holdings Sdn Bhd has disposed Fujitsu Building, a three-storey office building with two levels this is expected to be positive for the of basement car park for a total consideration of RM28.8 million. The freehold building is the first MSC status- country’s economic and property market granted standalone building in Cyberjaya. performance over the longer term. The deal was concluded by Knight Frank Malaysia
Malaysia moved up nine places to rank Source: Knight Frank Research number 15 in the World Bank Doing Business 2019 Report. Among the ASEAN countries, Malaysia is ranked second with 80.60 points after Singapore with 85.24 points.
8 Source: Knight Frank Research
REAL ESTATE HIGHLIGHTS MALAYSIA
HIGHLIGHTS KLANG VALLEY RETAIL MARKET
The MIER Consumer Sentiment MARKET INDICATIONS with circa 75% occupancy. Index (CSI) remained above the optimism threshold of 107.5 The MIER Consumer Sentiment Index GM Bukit Bintang (GMBB) is part of a points in 3Q2018 dropping from (CSI) slipped 24.5 points to 107.5 points mixed development in Kuala Lumpur a 21-year high of 132.9 points in in 3Q2018, from a 21-year high of 132.9 City with 100,000 sq ft retail space. Soft 2Q2018. points in 2Q2018. It, however, remained launched in October, its tenants include above the demarcation level of 100 points Jamaica Blue Fine Coffees, myNews.com threshold of optimism as consumers and 7-Eleven. Projected retail sales of 6.1% continue to be positive on their income and 4.3% for 3Q2018 and KL Eco City Retail Podium with circa levels and employment outlook. 4Q2018 respectively boosted 250,000 sq ft NLA made its debut by the 3-month tax holiday and The 3-month tax holiday and in September. Targeting the greater reintroduction of Sales and reintroduction of Sales and Services communities of Bangsar – Seputeh as Services Tax (SST) superseding Tax (SST) superseding the Goods and well KL - PJ, the five-storey retail podium the Goods and Services Tax Services Tax (GST) has boosted the retail is home to the biggest Jaya Grocer store (GST). industry with projected retail sales of dubbed Bangsar Market, spanning 50,000 6.1% and 4.3% for 3Q2018 and 4Q2018 sq ft. respectively. The Malaysia Retailer Recent completion of circa 1.40 Eko Cheras Mall is an integrated Association (MRA) has revised its full year million sq ft NLA of retail space development consisting retail, residential, 2018 retail sales forecast to 4.1%, an brings Klang Valley’s cumulative office and hotel components. Located optimistic figure compared to the 2.0% supply to 58.97 million sq ft in approximately 300 metres away from the growth for year 2017. 2H2018. Taman Mutiara MRT Station, the 4-storey SUPPLY & DEMAND lifestyle mall offers 625,000 sq ft of retail space. More malls are embarking on Over the review period, five shopping asset enhancement initiatives centres with combined NLA of (AEIs) and creating new approximately 1.40 million sq ft were experiences to stay relevant in the completed, bringing the cumulative competitive retail market. supply of retail space in Klang Valley to circa 58.97 million sq ft.
Grocery stores are offering wider The new completions are The Linc, GM selection of premium goods while Bukit Bintang, KL Eco City Retail Podium, incorporating food experiences. Eko Cheras Mall and Kiara 163.
The Linc, a retail centre with about The review period saw more 127,000 sq ft NLA, opened in November Eko Cheras Mall creative ideas and trends embracing technological innovation. An unmanned CHART 1 restaurant and a selfie museum Existing Cumulative Supply of Retail Space (Net Lettable Area) 2H2018 have made their debut, creating another level of experience in the local retail scene.
KL CITY 10.52mil sq ft 17.9% SELANGOR 30.57mil sq ft KL FRINGE 17.88mil sq ft 51.8% 30.3%
Source: Knight Frank Research
9 Opened in December, Kiara 163 is a entertainment space with a brand-new PRICES AND RENTALS lifestyle mall with NLA of 300,000 sq ft. attitude. The retail space is expected to launch in 1H2019. The monthly gross rentals of prime Amid growing competition in the retail shopping centres in Klang Valley market, more owners and operators The zero-rated Goods and Services Tax remained resilient. of shopping centres are embarking on (GST) has created a positive lift in the asset enhancement initiatives (AEIs) and retail segment. Prime and established regional and refreshing their trade and tenant mix to neighbourhood shopping centres with cater to changes in shopping trends as proven track record of high visitation well as to attract higher footfalls. remain as the preferred choice for retailers, both local and international, In September, the Lower Ground Level even at high rentals as there are potential at Midvalley Megamall underwent a to achieve better sales. layout repositioning; whereby partial space previously occupied by AEON Big Pavilion Kuala Lumpur and Suria KLCC was subdivided into smaller retail lots. continued to command higher average The layout repositioning and tenant mix monthly rentals, averaging at about stimulation saw the entry of new tenants RM26.00 per sq ft and RM37.00 per sq ft Lush first outlet opens in Pavilion such as Ah Cheng Laksa, San Francisco respectively. Coffee Express, Spa Ceylon Luxury The review period continued to mark the As for the other popular retail Ayurveda, and Marks & Spencer Food. entrants and expansions of international destinations such as Sunway Pyramid and local brands. Notable openings During the same month, the Lower and Mid Valley Megamall, the gross include Lush, Jacob & Co, Dean & Ground Level of The Gardens Mall also rentals range from RM14.00 per sq ft to DeLuca, Blancpain, Steve Madden and completed its AEI on an underutilised area RM17.00 per sq ft per month on average. Victoria Secret’s flagship store. that connects to the parking lifts at the Newly completed / operational shopping north section of the mall. The 14,000 sq There were also closures of outlets / exit centres which have yet to achieve high ft extension is now home to 12 tenants in of brands due to falling sales and changes precommitted take-up are offering longer in retail trends. rent free period and competitive rates to Lifestyle bakery and bistro, The Loaf, boost occupancy levels amid challenges closed all its 12 outlets in the country after in the retail market. 12 years in business while the Harrods OUTLOOK Café in Suria KLCC closed its doors in June 2018. Another six new shopping centres / supporting retail components within In August 2018, Aeon Malaysia which integrated developments, offering owns 49% of Thai-headquartered combined retail space of 4.04 million sq The Gardens Mall Extension Index Living Mall business in Malaysia ft, are expected to come onstream by announced the closure of its Index 1H2019. the F&B and lifestyle segments with new Living furniture outlets in the country. tenants such as Yu by Yuri, The Morning The affected outlets in Klang Valley are Retailers continue to be spoilt for choice. After, Mr Tuk Tuk, Jinjja Chicken and located at Aeon Shah Alam and IOI City Developers of new and less prominent Wendy’s. Mall in Putrajaya. The leading retailer will, shopping centres are offering attractive however, continue to refurbish selected incentives, partnership and short-term Paradigm Mall in Petaling Jaya has stores and employ appropriate marketing tenancies to pop-up retailers to improve completed its first AEI in October with and pricing strategies for its retail occupancy levels. new eateries and a food court on level LG. business. As for its property management Moving forward, we will see the Despite the closure of Parkson’s 107,000 services, it expects occupancy and rental downsizing of hypermarkets as their sq ft outlet in Sungei Wang Plaza, levels to remain stable and sustainable. owners respond to current consumer Capitaland Malaysia Mall Trust (CMMT), The remaining outlet of Rock Corner preference for smaller stores as well as which owns 62% of the strata-titled at The Gardens Mall closed down in the closure of non-profitable outlets due shopping mall, continues to undertake September after 28 years in business. to changes in domestic retail trends. AEI to transform the former iconic shopping destination, the third major Meanwhile, the closure of MPH Bookstore Tesco Stores (M) Sdn Bhd is reportedly refurbishment and reconfiguration since in 1 Utama Shopping Centre leaves the looking to venture into property development to monetise its assets by 2013. There will be a new zone, JUMPA, chain with less than 30 outlets across redeveloping its larger stores in selected in its 5-storey annexe block. JUMPA will the country. Brick and mortar bookstores localities in Klang Valley. cater to modern retail needs, offering face competition from online options like specialty retail, F&B, athleisure and family ebooks and online bookstores. Premium neighbourhood grocers such
10 REAL ESTATE HIGHLIGHTS MALAYSIA
which operates unmanned convenience TABLE 7 stores using technology in artificial Incoming Retail Supply 2H2018 - 1H2019 intelligence, image recognition, facial recognition and theft prevention system, Name of Shopping Mall Location Estimated Net Lettable Area has tied up with Scientific Retail, a local 2H2018 - New Completion/ Opening company. The Linc KL City 127,000 sq ft The country’s very first Selfie Museum opened in Fahrenheit 88 in August 2018. GM Bukit Bintang KL Fringe 100,000 sq ft This latest attraction spans over 7,000 sq ft and features nine different themes for KL Eco City Retail Podium KL Fringe 250,000 sq ft photo fantasies, creating a multi-sensorial Kiara 163 KL Fringe 300,000 sq ft experience to match the contemporary “Insta-worthy’ trend. EKO Cheras Mall KL Fringe 625,000 sq ft In conclusion, with supply continuing to 1H2019 - Expected Completion/ Opening outstrip demand, lesser established and TRX Financial Quarter KL City 126,000 sq ft new shopping centres without high pre- (Mulia 106 Exchange) committed take-up will continue to face Star Boulevard KL City 126,000 sq ft challenges in the diluted retail market. Rentals will continue to be under Queensville KL Fringe 412,000 sq ft pressure as operating costs rise although Pinnacle Selangor 140,000 sq ft the new increase in minimum wage is not expected to have a major impact on the Central i-City Shopping Centre Selangor 940,000 sq ft retail industry. (Central Plaza @ i-City) Owners and operators of existing Empire City Damansara Mall Selangor 2,300,000 sq ft shopping centres need to continuously refresh and reinvent their assets and offerings by embarking on AEIs while retailers need to ensure that their stores remain relevant to cater to current shopping habits. In terms of investment Source: Knight Frank Research and revaluation, the market value holds steady with some of the prime shopping
TABLE 8 centres reporting an average increase Retail Investment Sales 2H2018 of between 1.0% and 4.5%. The short term outlook for the retail sector is one of Building Name Location Approx. Lettable Consideration caution amid a slowdown in the country’s Area (sq ft) (RM per sq ft) economy. SStwo Mall(1) Petaling Jaya 460,000 RM180.0 million (RM391 per sq ft)
Setapak Central Mall(2) Setapak 494,000 -
Notes: (1) The Puchong-based DK Group of Companies has completed the deal at the end of July. The deal is done between AsiaMalls Sdn Bhd and DK Group of Companies. (2) The Singapore-based ARA Asset Management Ltd has entered the deal with AsiaMalls Sdn Bhd.
Source: Knight Frank Research
as Jaya Grocer, Village Grocer and Ben’s Restaurant “grEAT” in 1 Utama Shopping Independent Grocer have successfully Centre is the first automated restaurant incorporated food experiences within without any waiters, where all orders are their selected outlets that span 20,000 sq just one tap away. ft to 25,000 sq ft on average. China’s BingoBox has hit Malaysian Retailers are also embracing technology shores with stores at Bukit Ceylon and to innovate in-store experiences. Shell Jalan Tun Razak. The company
11 HIGHLIGHTS KLANG VALLEY INDUSTRIAL MARKET
The construction of state-of- MARKET INDICATIONS SUPPLY & DEMAND the-art, multi-storey warehouses that are sizeable in scale, Malaysia’s industrial production index LYL Group completed two build-to-suit continues to garner momentum (IPI) was higher by 4.2% year-on-year warehouses measuring 118,000 sq ft and 154,000 sq ft respectively in August as manufacturers and logistics (y-o-y) in October 2018. Growth in the IPI 2018. The new facilities which are located operators seek to mitigate high was supported by higher output in the in the 65-acre LYL Logistics Park in land costs and centralise their manufacturing and electricity sectors. Section U10 of Shah Alam are to be operations. Selangor, the gateway to the Asean occupied by logistics firm, DB Schenker market given its strategic location with as part of its business expansion. well-developed infrastructure and pool The country’s aerospace industry of skilled labour, had the highest number is poised for further growth as The first phase of Axis Mega Distribution of approved manufacturing projects (83) Centre (AMDC) was recently completed. Khazanah will lead and develop for the January to June 2018 period. The Located in Taman Industri Sijangkang an 80-acre site in Subang and state was ranked in 3rd position in terms Utama in Telok Panglima Garang, the transform it into an aerospace of proposed capital investment with facility by Axis Real Estate Investment hub. By 2020, the government RM3.10 billion. Trust (Axis REIT) comes equipped with targets to develop 30 more small high specifications that include high-end and medium enterprise (SME) In the aerospace sector, the government sprinkler system, LED lighting and players operating in the sector. is looking to develop 30 more new SMEs by 2020. The “3S” aerospace belt of rainwater harvesting system. It is the new Selangor, namely Subang, Serendah and distribution centre for Nestle Products The proposed free trade zone Sepang, is poised for growth moving Sdn Bhd. (FTZ) on 380 acres of land in into 2019 and 2020. Khazanah Nasional Alpha Galaxy Group of Companies is Pulau Indah will serve as a Berhad together with agencies such as currently developing the Galaxy Logistics catalyst to spur more shipping Majlis Amanah Rakyat (Mara) will revive Hub on a 60-acre plot of land in Kuala and logistics activities in Port the 80-acre aerospace hub in Subang, a Selangor. It will consist of two warehouse Klang. project first mooted in 1997. blocks with total built-up area of 1.5 Meanwhile, to spur trading activities, the million sq ft that come equipped with The on-going trade war between government will convert 380 acres of land firefighting system in compliance with FM China and the United States in Pulau Indah into a free trade zone (FTZ) standard. More than half of the may serve as a window of to support and increase shipping and warehouse space, measuring 850,000 sq opportunity for Malaysia to logistics activities in Port Klang. attract manufacturers from both economic superpowers to set up FIGURE 3 their production facilities here. Malaysia is not susceptible to Cumulative Supply of Terraced, Semi-Detached and Detached Factories 2013 - 1H2018 tariffs which are imposed by the countries due to the trade war. 35,000
30,000
25,000
20,000
15,000
10,000 Cumulative Supply (Total No. of Units) 5,000
0 2013 2014 2015 2016 2017 1H2018 Year
Detached Semi-detached Terraced - Existing - Existing - Existing Source: NAPIC
12 REAL ESTATE HIGHLIGHTS MALAYSIA
ft, will be anchored by Continental Tyres of the facility to other firms and upon its KLANG VALLEY INDUSTRIAL MARKET PJ Malaysia as its national distribution opening, it is expected to achieve close centre. The facility is expected to be to full occupancy. ready by 1Q2019. Sizeable industrial facilities with higher In the industrial zone of Section 21, specifications such as generous clear Shah Alam, Nippon Express (Malaysia) height exceeding 40 ft, automated Sdn Bhd will be constructing a new loading platforms, high standard sprinkler warehouse on the former site of Silverbird system and automated racking systems Complex. The new double-storey facility are also gaining popularity. on the 14.7-acre site will feature wide Mapletree Logistics Hub Mapletree Logistics Hub Shah Alam is a ramp up and offer a total built-up area multi-tenanted facility that comes with of 682,658 sq ft. Groundworks are in properties with high specifications. wide multi-storey ramp up which are progress with construction slated for feasible for larger trailer trucks (for 40ft There are several notable incoming completion by December 2019. containers) to manoeuvre, top-notch industrial developments within Klang At Bandar Bukit Raja in Klang, the sprinkler system, automated loading Valley that share common features - upcoming headquarters for CJ Logistics platforms and LED high beam lighting. gated and guarded concept with higher consists of a 3-storey warehouse with The first phase was fully completed in specifications that include high-speed a 3-storey office building annexe that November 2017 while the subsequent fibre optic broadband and, separate comes with wide multi-storey ramp up. phase commenced operations in April heavy vehicle entry and exit gates. The facility comes with a total built-up 2018. As of December 2018, the entire Located in Section 23 of Shah Alam, area of 525,949 sq ft. Construction is facility has an overall occupancy rate Hap Seng Industrial Hub spans more at 65% with full completion slated by of circa 89%, a testament that strong than 20 acres and is the first in Malaysia 2Q2019. CJ Logistics will rent out part latent demand is present for industrial that comes with a dedicated basement
TABLE 9 New Industrial Facilities with High Specifications
EXISTING DEVELOPMENTS
Name/ Description Location Estimated Status of Building Built-up
Axis Mega Taman Industri 515,000 sq ft Phase 1: Completed January 2018 Distribution Centre Sijangkang Utama Subsequent phases to be launched
Mapletree Logistics Hub Section 22, 2,294,115 sq ft Second phase opened on April 2018 - Shah Alam Shah Alam First phase opened on November 2017
INCOMING DEVELOPMENTS
Headquarters for Bandar Bukit Raja, 470,000 sq ft Under construction, Century Logistics Klang expected completion 2Q2019
Warehouse for Section 22, 682,658 sq ft Under Construction, Nippon Express Shah Alam expected completion December 2019
Area Logistics Ulu Kelang 1,200,000 sq ft Under Construction, @ Ampang Free Trade Zone expected completion 3Q2019
Galaxy Logistics Hub Kuala Selangor 1,500,000 sq ft Under Construction, expected completion 1Q2019
Notes: (1) Mapletree Logistics Hub – Shah Alam is professionally managed by Knight Frank Malaysia (2) Both Mapletree Logistics Hub- Shah Alam and Axis Mega Distribution Hub were completed in 1H2018. At the time of writing, Mapletree Logistics Hub - Shah Alam was still in the process of securing tenants while Axis REIT was actively seeking opportunities for its Phase 2 development. Source: Knight Frank Research
13 car park offering over 900 bays. The development comprises a 6-storey flatted warehouse; 12 units of 5-storey semi-detached factories and 4 units of 3-storey detached factories as well as a 5-storey retail cum office component with combined NLA of 59,809 sq ft. The project is currently at piling stage and is expected to be completed by 2020. AREA Ampang
Eco Business Park V is an on-going gated and guarded industrial park on 518 three-level warehouse in the Ulu Kelang its surrounding fringe areas. Free Trade Zone. The warehouse, which acres of land in Bandar Puncak Alam. During the review period, AREA acquired is currently at 55% completion stage, To date, launched components include a parcel of industrial land measuring cluster, service, semi-detached and is targeting to obtain its certificate of 212 acres at Kota Seri Langat in Banting detached factories, with estimated sales completion and compliance (CCC) by for RM320 million. Unveiled as THE rate of circa 89% as of December 2018. 3Q2019. Located approximately 6.8km COMPASS @ Kota Seri Langat, the gated The rise of e-commerce activities has from KLCC, this inner city distribution hub and guarded industrial park will feature breathed a new life to the city’s industrial is targeted at tenants / occupiers in the ready built detached factories (built- property market. Area Management Sdn e-commerce / logistics sector who strive ups of 12,000 sq ft to 75,000 sq ft) and Bhd (AREA), a real estate private equity to provide same-day delivery services to customised build-to-lease units sized from firm, is constructing a 1.2 million sq ft their customers within the capital city and 200,000 sq ft.
TABLE 10 Selected Developments: Existing and Future Supply
Name of Development Location Developer Status Remarks
LYL Logistics Park U10 Shah Alam LYL Group On-going • Within a 65-acre existing logistics park • 2 units of built-to-lease warehouses with built-ups of 118,000 sq ft and 154,000 sq ft respectively • To be occupied by DB Schenker
Hap Seng Industrial Hub Section 23, Hap Seng Land Upcoming • New industrial hub spanning more than 20 acres Shah Alam • Components include the following:
No. of Approx. Built-up Type Units per unit
6-storey 1 525,091 sq ft flatted warehouse (mezzanine 16,881 sq ft) 5-storey semi- 12 42,052 sq ft detached factory 3-storey 4 35,565 – detached factory 62,760 sq ft 5-storey 1 59,809 sq ft retail & office • Dedicated basement car park with over 900 bays
Eco Business Park V Bandar Puncak Jointly developed Upcoming • Gated and guarded industrial park spanning 518 acres. Alam by Eco World • Products launched to date include: Development • 92 units of cluster factories Berhad and • 64 units of service factories KWSP • 28 units of semi-detached factories • 12 units of detached factories
THE COMPASS Kota Seri AIDF Under Components: @ Kota Seri Langat Langat Industrial Park Planning • Ready built detached factories measuring between Sdn Bhd (1) 12,000 sq ft and 75,000 sq ft. • Build-to-lease detached factories measuring at 200,000 sq ft and above Note: (1) AIDF Industrial Park Sdn Bhd is a special purpose vehicle of AREA Group of Companies Source: Knight Frank Research
14 REAL ESTATE HIGHLIGHTS MALAYSIA
Similarly, Mapletree Dextra Pte Ltd had and Klang, rental rates hover between from RM40.4 billion during the same entered into an agreement to purchase RM1.30 per sq ft and RM1.80 per sq ft period in 2017, with the manufacturing 38.80 acres of industrial land in Section per month. sector accounting for RM49.8 billion, or 15, Shah Alam, from UMW Holdings Bhd circa 80.8% of investments approved. Industrial cum warehouse space that for a consideration of RM287.7 million. Among the total investments approved, come with state-of-the-art facilities and UMW will in turn rent part of the land FDI stood at RM43.8 billion (71.1%) as higher specifications (build-to-suit / build- from Mapletree for at least 3 years at a opposed to RM24.4 billion (60.4%) in the to-lease) are able to command significant yearly rental totalling RM12.6 million. corresponding period. premium in rental rates. We will continue to see more global PRICES & RENTALS Build-to-suit Axis Mega Distribution companies making Malaysia their Hub, which is located at Taman Industri Established and mature industrial areas hub, following in the footsteps of IKEA Sijangkang Utama, command high rental in selected localities within Klang Valley Regional Distribution Centre in Pulau rate of circa RM3.11 per sq ft per month continue to undergo transformation over Indah and Lazada e-Commerce Regional while the asking rental at Mapletree the years. Due to rapid developments Distribution Centre in Sepang. in the surrounding areas and rising Logistics Hub in Shah Alam is in the land prices, many of these industrial region of RM2.00 per sq ft per month. In the mid-term, the on-going US-Sino trade conflict is expected to benefit premises sit on lands which are ripe for Meanwhile, we were given to understand Malaysia, particularly in the electronic redevelopment. that monthly asking rentals at the on- integrated circuits, liquefied natural gas going Hap Seng Industrial Hub which In Kuala Lumpur, the industrial hotspots and communication apparatus segments. of Chan Sow Lin and Segambut continue is available for lease only range from to witness redevelopments in the form RM1.80 per sq ft to RM2.50 per sq ft per of higher density projects which can month. generate higher gross development OUTLOOK values (GDVs). Similar trend can also be observed in industrial areas such as The prospects for Klang Valley’s Section 13 of Petaling Jaya in Selangor. industrial and logistics property market remain positive as more clarity in the In contrast, new industrial parks on policies of the newly elected government greenfield sites are coming up in areas unfolds. supported by transport infrastructure developments and offer large tracts Several measures announced under the of land for development at lower and recently tabled Budget 2019 will support attractive land costs. growth of the industrial sector, especially high-technology industries. The National Notable on-going and upcoming Policy on Industry 4.0 or Industry4WRD, industrial parks that are looking to strives to catalyse growth of key sectors capitalise on improved connectivity, for in the realm of electrical & electronics, example via the RM6 billion West Coast machinery & equipment, chemicals, Expressway (WCE) project include THE aerospace and medical devices. It will COMPASS @ Kota Seri Langat and Eco pave the way for enhanced productivity, Business Park V. job creation and high skilled talent pool in The on-going WCE project which is over the manufacturing sector. 50% complete will connect the main Malaysia remains a competitive coastal towns such as Klang, Kuala investment location for foreign investors Selangor, Teluk Intan, Setiawan, Manjung despite rising competition and a and Hutan Melintang. Spanning some challenging external environment. The 233km with 21 interchanges, of which, country was ranked 25th out of 140 10 are in Selangor and 11 in Perak, it countries in the World Economic Forum’s will also be linked to existing highways (WEF) 2018 Global Competitiveness including the North-South Expressway, Report (GCR). Within Asia-Pacific, South Klang Valley Expressway, North Malaysia was ranked eighth most Klang Valley Expressway and Shah Alam competitive behind Singapore, Japan, Expressway. Hong Kong, Taiwan, Australia, South Korea and New Zealand. The average asking rentals for detached factories in areas such as Chan Sow Lin From January to August 2018, Malaysia and Segambut have exceeded RM2.50 approved RM61.6 billion in both per sq ft per month. In Shah Alam domestic and foreign investments, up
15 HIGHLIGHTS PENANG PROPERTY MARKET
New residential launches on the RM800 per sq ft (11, Gurney Drive) to MARKET INDICATIONS island comprised mostly serviced RM1,063 per sq ft (Gurney Paragon). suites, mid-range residential During 1H2018, Penang State saw Units sized from 1,137 sq ft to 2,828 sq developments and affordable increases in both volume and value ft in Quayside Condo in Seri Tanjung homes whilst on the mainland, of transactions of 5.3% and 5.5% Pinang were resold at prices ranging developers generally focus on respectively when compared to the from RM810 per sq ft to RM1,094 per landed housing schemes with corresponding half of 2017 (Source: sq ft whilst larger sized condominiums some flatted developments. NAPIC). Meanwhile, the residential with built-up areas of 3,400 sq ft to 6,000 sub-sector accounted for a 72.3% sq ft in the popular locality of Tanjung Bungah were sold at prices ranging from Purpose-built office space share of the total volume of transactions RM471 per sq ft (The Cove) to RM892 continues to enjoy stable rents numbering 8,303 units and is worth per sq ft (One Tanjong). Located at the and high occupancies. Newer RM2.458 billion or 57.3% of the total south-eastern portion of the island, units buildings command higher asking value for all sectors. sized from 1,367 sq ft to 1,528 sq ft rents compared to older buildings. Tourist arrivals into Penang is set to rise at Light Collection I & II were resold at if the planned low-cost carrier terminal prices ranging from RM752 per sq ft to The expected entry of new retail (LCCT) by Air Asia takes off ground and RM883 per sq ft as against RM1,219 per space in March 2019 from Ikea is completed by 2022. The LCCT, to be sq ft for studio units sized 517 sq ft at Batu Kawan will pose more constructed on the site of MAS Cargo The Light Collection II. challenges for the existing malls. Complex, will accommodate the increase of planes from the current five to sixteen Asking rents are noted to be similar to and is targeted to bring eight million those during 1H2018. For larger sized The industrial sector is staying passengers per annum to Penang. units in Tanjong Bungah, asking rents strong with good demand for are still generally between RM1.20 per industrial premises, both for sale Additionally, the expansion of the sq ft and RM2.10 per sq ft per month and rental. Swettenham Cruise Terminal Pier from with the upper band asking from RM1.80 400 metres to 700 metres, which will per sq ft to RM2.56 per sq ft per month. accommodate two mega cruise vessels Phase 1 of the Penang Transport For similar sized units in Gurney Drive, simultaneously, will also bring in more Master Plan (PTMP) will proceed. asking rents vary from RM1.70 per sq ft tourists. All required studies will be to RM2.60 per sq ft per month whilst for conducted before implementation The first phase of Penang Sentral, the smaller sized units in Tanjong Tokong of the projects (including the integrated transportation hub for land, and Gurney Drive, it ranges from RM2.24 Social Impact Assessment (SIA)). sea and rail located in Butterworth, per sq ft to RM3.08 per sq ft per month. The SIA for Phase 1, comprising has opened in December 2018. To be It is noted that some landlords are still the Pan Island Link 1 highway, developed over seven phases, three asking higher rents of more than RM3.50 the Bayan Lepas light rail transit phases currently under construction and per sq ft per month. (LRT) system as well as several comprising retail mall, office tower and OFFICE major roads are understood to business hotel are expected to complete have already been conducted and by 2030. Future phases are understood The existing supply of office space submitted to the relevant technical to include SOHO units, commercial (buildings of 10-storey and above) on departments for approval. development and serviced apartments. Penang Island remains at 1H2018’s level of 5.71 million sq ft. There was no HIGH-END CONDOMINIUM incoming supply for 2H2018.
Similar to 1H2018, condominiums The occupancy rates for the four prime and apartments form the main bulk of office buildings monitored in Georgetown launches in Penang during the review average at about 92.0%, dipping slightly period. There were no launches of high from 1H2018’s level of 94.5%. The newer end condominiums in 2H2018. buildings located out of Georgetown, namely One Precinct, Suntech and There are lesser recorded transactions of Menara IJM Land also collectively high-end condominiums in the secondary recorded a slight drop in occupancy to market in 2018. Subsale transactions 98.0% compared to 99.6% for 1H2018. in early 2018 for condominiums sized 2,000 sq ft to 3,500 sq ft in the Gurney It is noted that the older buildings in Drive vicinity were at prices ranging from George Town have lower asking rents
16 REAL ESTATE HIGHLIGHTS MALAYSIA
averaging RM2.80 per sq ft to RM3.10 status accreditation in 1H2018, asking VOS Lifestyle Suites is a proposed per sq ft compared to newer buildings rents at Albukhary Building (Wawasan 32-storey office block located at Bukit at RM3.60 per sq ft to RM4.50 per sq ft, Open University) in George Town, jumped Dumbar. Built on SOHO concept, especially for buildings with MSC status from RM2.80 per sq ft to RM3.60 per sq construction works will start in January accreditation. Following its Tier 1 MSC ft per month. 2019. Expected to complete by 2022, this development will have 439 units sized
TABLE 11 from 364 sq ft to 521 sq ft for sale on Asking Gross Rentals of Selected Purpose-Built Office Space in Penang strata basis and at prices ranging from RM1,225 per sq ft to RM1,300 per sq ft. Project/ Developer Location Asking Gross Rental Recently soft launched with 40% of the (RM per sq ft / month) units sold, this development offers club Hunza Tower Georgetown 3.80 (passing rents)* facilities featuring function hall, swimming
Menara Boustead Penang Georgetown 2.80 - 3.10* pool, sky bistro, gym and enhanced 24- hour security. The individual units come Menara KWSP Georgetown 2.80 - 3.00* with private washrooms and high-quality MWE Plaza Georgetown 2.80 (fixed rent)* finishing. Menara IJM Land Jelutong 3.15 - 3.60 (passing rents) RETAIL
SunTech @ Penang Cybercity Bayan Baru 4.80 (last unit sized 6,800 sq ft and fitted out) The existing supply of purpose-built One Precinct Bayan Baru 4.00 shopping space on Penang Island remained unchanged at 1H2018’s level of *Denotes rental inclusive of centralised air-conditioning 6.99 million sq ft. No new purpose-built Source: NAPIC / Knight Frank Research (as at November 2018) shopping malls were completed on the
TABLE 12 Future Supply of Office Space in Penang
Project / Location Net Lettable Scheduled Remarks Developer Area (sq ft) Completion STATUS: UNDER CONSTRUCTION VOS Lifestyle Suites Bukit Dumbar 215,000 2022 Construction to start January 2019; sale on strata basis
Siuwah Bandar Baru Not available 2022 18-storey Corporation Bhd Air Itam STATUS: PLANNED
GBS@The Sea Bayan Lepas 410,000 Beyond 2020 Proposal on hold for now
The Light City Light 370,000 Beyond 2020 28-storey Waterfront
Hunza Group’s PICC Bayan Baru - Beyond 2020 54-storey commercial building (office & hotel) as Phase 2A of a 3-phase project with scheduled completion in 2026.
Sunway Group Paya Terubong 410,000 Beyond 2020 9-storey office block / integrated development
Source: NAPIC / Knight Frank Research (as at November 2018)
17 island in 2H2018. along Jalan Baru (2021) and a retail mall billion of domestic investments. currently under construction as part of Occupancy rates for the prime shopping The existing industrial parks managed Penang Sentral which is being developed malls on the island generally ranged from by Penang Development Corporation over seven phases with completion 80.0% to 98.0% whilst for the secondary are all matured and the Penang State expected in 2030. shopping malls, the range is generally Government is currently placing great from 70.0% to 90.0%. There are several proposed shopping emphasis to bring up the Batu Kawan malls coming up over the next five years Industrial Park, being part of a new In the prime shopping malls, monthly on the island, namely Sunshine Tower, township complemented by other rental rates for ground floor retail lots Penang Times Square (Phases 3 & 4), developments of residential, retail, generally ranged from RM12.00 per Sunway (Paya Terubong) and The Light educational and recreational nature, all sq ft to as high as RM45.00 per sq ft, Waterfront Mall. these being in various stages of planning, depending on the mall, location and size construction and completion. of the units. INDUSTRIAL CPI (Penang) Sdn Bhd, an indirect More retail space will enter the market For the first six months of 2018, Penang subsidiary of Kumpulan Peransang when IKEA Batu Kawan opens its doors received RM1.984 billion of investments Selangor Bhd has bought a a 4.5-acre in 1H2019. comprising RM1.268 billion and RM716 million of domestic and foreign plot of land in Bayan Lepas Industrial Park On mainland Seberang Perai, future investments respectively. In 2017, the for RM27.7 million. Construction for a new supply will come from the extension state did well to record the highest electronic manufacturing services (EMS) of Sunway Carnival Shopping Mall foreign investments into the country plant is set to commence in 1H2019 with (4Q2020), the 120,000 sq ft GEM Mall worth RM8.5 billion and another RM2.27 scheduled completion by 2020. Atrium REIT announced their proposed TABLE 13 acquisition of two industrial properties Future Supply of Retail Space in Penang in Bayan Lepas Industrial Park from PENANG ISLAND Lumileds Malaysia Sdn Bhd on a sale and leaseback basis. Atrium REIT has Project Estimated Net Scheduled Completion accepted the Letters of Acceptance from Lettable Area (sq ft) Lumileds for (i) a 7.62-acre industrial manufacturing plant at RM50 million; and STATUS: UNDER CONSTRUCTION (ii) an 11.82-acre industrial complex at Sunshine 900,000 2022 RM130 million. The sale and purchase Tower of both properties is subject to getting Penang Times Square 340,000 Phase 3: Late 2019 the necessary approvals to transfer from Phases 3 & 4 Phase 4: Not available yet Penang Development Corporation and the State Authority. STATUS: PLANNED OUTLOOK Sunway 1,000,000 - (Paya Terubong) The general outlook for the Penang property market remains mixed without a The Light 1,500,000 (GFA) - dominant overall trend. Waterfront Mall However, resulting from the interplay SEBERANG PERAI of supply and demand as well as the Project Estimated Net Scheduled Completion general economy, different sectors are Lettable Area (sq ft) performing differently. STATUS: UNDER CONSTRUCTION The residential sector, which is the leading sector in terms of total volume IKEA Batu Kawan 430,000 Opening in 1Q2019 and value of transactions, has shown Sunway Carnival 330,000 4Q2020 some improvement during 1H2018. It Shopping Mall registered a 5.4% increase in the volume (expansion) of transactions year–on-year. This trend is expected to continue. STATUS: PLANNED The office sector is still enjoying stable Gem Mall 1,200,000 2021 rents and high occupancies although Penang Sentral Not Available 2030 the overall occupancy rates in some buildings have dropped marginally. This Source: Knight Frank Research favorable state of affairs is expected to
18 REAL ESTATE HIGHLIGHTS MALAYSIA
continue for the next few quarters as new supply is only expected to come on- stream beyond 2020.
Current supply in the retail sector remains unchanged but a more challenging scenario is anticipated for this sector with new supply to come on-stream next year with the expected opening of IKEA in Batu Kawan in 1Q2019 and the extension of Penang Times Square also in 2019. Other retail centres / expansion of retail centres will also be adding on the supply in 2020 and 2022.
The industrial sector, on the other hand, is still experiencing strong demand in both its rental and sale markets.
With the anticipated improvements and expansion of the Penang International Airport and the Swettenham Cruise Terminal together with the creation of a duty-free cruise centre here (as announced in Budget 2019), tourist arrivals can be expected to increase which will give a positive impact on the state’s economy as well as the retail sector. All in all, future prospects are VOS Lifestyle Suites anticipated to be positive.
19 HIGHLIGHTS JOHOR BAHRU PROPERTY MARKET
In contrast, there were no new launches Iskandar Malaysia recorded MARKET INDICATIONS of high-rise residential properties during total cumulative investment of As of 1H2018, the volume of property the review period. The completions of RM272.90 billion as of 3Q2018. transactions for both residential and several notable projects which were The mixed development segment commercial sectors in Johor improved by initially scheduled for 2H2018, such as leads with investment of RM9.7 14.2% and 20.8% respectively whilst for D’Pristine and The M in Medini, have billion, followed by logistics the industrial sector, transaction volume been postponed to 2019. Meanwhile, the (RM670 million), creative industry was lower by 13.1% year-on-year (y-o-y). construction of Southern Marina in Puteri (RM540 million), education Harbour is on track and is expected (RM540 million) and tourism The value of property transactions was to handover on January 2019 while (RM320 million). marginally higher for the residential sector (0.6%), although it saw trickle down trend Twin Danga Residences @ Perling was in the commercial and industrial sectors, completed recently in November 2018. The trend for the residential at -18.7% and -20.8% respectively. RETAIL sector, both landed and high-rise RESIDENTIAL categories, remained similar to As of 1H2018, the existing supply of retail 1H2018 as developers continue The existing residential stock in Johor space in Johor Bahru district stood at to focus on the mass housing and Bahru stands at 420,004 units as of 15.8 million sq ft, an increase of 25.4% landed residential segments. 1H2018. from 1H2017 (y-o-y). Average occupancy Notable new launches in the Iskandar rate declined to 75.6% in 1H2018 The commercial sector saw the Malaysia region offer circa 555 units of (1H2017: 81.3%). completions of two MSC office double-storey terraced houses, 60 units During the review period, three retail buildings, namely Medini 9 and of double-storey cluster homes and 40 malls with cumulative supply of more Menara JLand Office Tower. units of semi-detached houses in the than 1.50 million sq ft were completed. Average rental rate continued to landed residential category. They are Helios Cove in Permas Jaya, hold steady. A summary of the selected new launches Capital City Mall and Tesco Eco Tropics is shown in Table 14. in Kota Masai. The retail supply in Johor Bahru
increased by circa 1.50 million TABLE 14 sq ft following the completion of Notable New Landed Project Launches in Iskandar Malaysia 2H2018 Capital City Mall with more than a Ayera Residences Harp million sq ft NLA. Name of Hazel The Mahligai (Tropicana (Taman Development (Meridin East) (Nusa Damai) Danga Cove) Desa Tebrau)
In the industrial sub-sector, there Tropicana Danga Plenitude Tebrau Temokin Holdings Developer Mah Sing Group were limited new launches of Cove Sdn Bhd Sdn Bhd Sdn Bhd
industrial parks. Nonetheless, the Masai, Location JB City Fringe JB City Fringe Kulai industrial market was fairly active Pasir Gudang
with a few notable transactions Double-Storey Double-Storey Cluster Double-Storey Double-Storey Type in the localities of Senai, Tebrau, Terraced House & Semi-D Terraced House Terraced House Gelang Patah and Pengerang. No. of Units Phase 1: 179 Phases 1 & 2: 212 236 Phases 1 & 2: 140
Built-Up Area 1,713 – 1,970 sq ft from 2,580 sq ft 1,900 sq ft 1,679 - 1,752 sq ft
Selling Price From RM586,000 from RM1.12 million – from RM500,000 from RM480,000 (per unit) RM1.22 million
Source: Knight Frank Research
20 REAL ESTATE HIGHLIGHTS MALAYSIA
TABLE 15 Average Asking Prices and Rental for Selected Existing High Rise in Johor Bahru in 2H2018
Average Asking Average Asking Rental Name of Development Location Type Price (RM/ sq ft) (RM per sq ft/ month)
Suasana Residences JB City Centre Serviced Residences 1,200 3.80 R&F Princess Cove JB City Centre Serviced Residences 1,000 2.70 Country Garden JB City Centre Condominium 930 2.50 @ Danga Bay Tropez Residences JB City Centre Condominium 600 1.80 @ Danga Bay The Astaka JB City Centre Condominium 1,270 3.00 @ One Bukit Senyum Paradiso Nuova Iskandar Puteri Condominium 1,000 2.50 Puteri Cove Residences Iskandar Puteri Condominium 1,260 3.80 & Quayside
Source: NAPIC / Knight Frank Research
Group. Among its other notable tenants scheduled to commence by 1Q2019 with are Watsons, Samsung, Huawei, Gene completion in 2020. Martino Apparel, XES and Sushi King. Knight Frank Malaysia is the exclusive leasing agent Originally, 3.50 million sq ft of retail space for the Seri Alam Mall. from Southkey Mid Valley Megamall, OFFICE D’Pristine Mall and The M in Medini are expected to come onstream by the end The existing supply of purpose-built of 2H2018. However, the completions office space stood at 9.4 million sq
Capital City Mall have been delayed to 2019. ft as of 1H2018. There was a slight improvement in the overall occupancy Helios Cove in Permas Jaya is located Another 300,000 sq ft of retail space from level which increased 4.5% y-o-y to overlooking the Senibong seafront. The Princess Quay @ R&F Mall is expected to 79.0% (1H2017: 75.6%). enter the market by end 2H2018. 300,000 sq ft mall with its edutainment Notable offices that have occupancies concept has created a new level of During the review period, UMLand held exceeding 80% are City Square Office experience in the Johor Bahru retail scene. a signing ceremony with tenants for its Towers, Menara Komtar, Menara Ansar upcoming Seri Alam Mall in Bandar Seri Capital City Mall, a new mega mall in and Medini 6. Alam. Among the committed tenants Tampoi, spans over 1.20 million sq ft with are TGV Cinemas, Village Grocer In the city centre, rental rates continued an indoor theme park on the third and Supermarket, Morganfield’s, Bread to remain firm, averaging at about fourth floors. RM3.00 per sq ft per month in 1H2018. Talk, Toast Box, Gogirou Korean BBQ, In Kota Masai, the single-storey Macgregor’s Irish Pub and Romantika During the review period, two purpose- hypermarket of Tesco Eco Tropics Home Décor. Construction of the mall built offices with combined NLA of caters to the residents of the on-going with 340,000 sq ft of net lettable area approximately 680,000 sq ft were Eco Tropics Township by Eco World (NLA) and about 1,020 car parks is completed.
21 TABLE 16 Notable Newly Completed/ Incoming Shopping Malls in Iskandar Malaysia in 2H2018
Net Lettable Area/ Completed / Name of Development Location Type Average Unit Size (sq ft) Expected Completion
Tesco Eco Tropics Kota Masai, Single-storey N/A Newly completed Pasir Gudang hypermarket
Helios Cove JB Fringe 4-storey shopping mall 300,000 Newly completed
Capital 21 JB Fringe 6-storey shopping mall 1.0 million Newly completed
Princess Quay JB City Centre 3-storey shopping mall 300,000 End of 2018 @ R&F Mall
Source: NAPIC / Knight Frank Research
Medini 9 is a 21-storey office tower with To-date, there are only three office The integrated industrial development of retail space on the ground level and a 5- towers with MSC status in Johor Bahru Senai Airport City (SAC) is expected to be storey car park in Medini City. The MSC district. They are MSC Cyberport, Medini fully developed and operational by 2025. status office building has secured Ernst 9 Office Tower and Medini 7 Office. Located on the northern part of Iskandar & Young, a multinational professional Malaysia, the industrial park with a total Office towers in the pipeline include services firm and OKAKICHI and Deluxe of 2,718 acres will be developed in five Medini 10, UM City Medini Lakeside and Games, Japanese game developers phases. Some 400 acres of the master Menara MBJB @ One Bukit Senyum. among its tenants. plan has been allocated to a Free Zone. INDUSTRIAL The first phase, covering 1,200 acres, has Located in Johor Bahru City Centre, seen a 50% utilisation. Menara JLand is a 37-storey Grade A As of 1H2018, the existing supply of office tower with circa 260,000 sq ft NLA. industrial properties in District of Johor I-Park Development Sdn Bhd and Its office suites, with floor plates ranging Bahru stood at 10,317 units, contributing EcoWorld Development Group Bhd, from 8,000 sq ft to 12,000 sq ft, rise circa 62.2% of the state’s total industrial the catalyst developers, were awarded above the existing mid to upscale retail stock (16,574 units). contracts to manage I-Park@Senai podium of Komtar JBCC. Menara JLand Airport City and Eco Business Park II in is a GBI Gold accredited building and is There were no new launches of industrial a move to complement each other and currently in the process of applying for parks in 1H2018 and the volume of create the complete ecosystem for SAC. MSC status. transactions in the sub-sector was also In addition to logistics and food, SAC lower. Knight Frank Malaysia is the exclusive leasing agent is also targeting hi-tech and green for Menara JLand Office Tower. During the period under review, MMAG manufacturing, electrical and electronics, Holdings Bhd entered into a Sale aerospace manufacturing and and Purchase Agreement (SPA) with maintenance, repair and overhaul (MRO). Liangsiang Capital Sdn Bhd to acquire four units of one and a half storey semi- OUTLOOK detached factories at Empire Park for a The overall market performance for Johor total consideration of RM10.46 million. Bahru was generally quiet in 2H2018 with The factories will be occupied by its lesser market activity in terms of new subsidiary for future logistics storage and launches and transactions. warehouse needs. For the residential market, the trend Kempas Food Industries Sdn Bhd is most likely to continue into 1H2019 (AKFI) entered into a Sale and Purchase where supply from new launches will Agreement (SPA) with Ayam Kempas Sdn predominantly be made up of landed Bhd (AKSB) for the acquisition of 1.96 units. hectares of land in Tebrau and a single- storey detached factory in Senai, both for In the strata residential segment, due to RM14.30 million. AKFI also entered into the high supply pipeline of condominiums a Supplemental Agreement with AKSB / serviced apartments, the rental market to acquire all the plant and machinery remains under pressure. Investors are situated in the Senai factory for RM12.35 more likely to opt for smaller units - Menara JLand Office Tower million. besides ease of leasing, these units are
22 REAL ESTATE HIGHLIGHTS MALAYSIA
also more palatable in terms of pricing. The uncertainties on the delayed High- Meanwhile, the freeze for high-rise Speed Rail (HSR) is expected to affect developments still remains. property values within the vicinity of the proposed stations. More landowners are In the retail scene, newly completed and seen to adopt a ‘wait and see’ attitude. upcoming shopping malls are expected to add more pressure in 2H2018 and Meanwhile, the delayed Johor Bahru – beyond. Malls with good concepts and Singapore Rapid Transit System (RTS) is better designs coupled with diverse expected to complete by 2024. The RTS trade and tenant mix such as Paradigm is anticipated to reduce the congestion in Mall, Aeon Tebrau and JB City Square the causeway and improve connectivity continue to attract high footfalls. between Malaysia and Singapore.
Despite heightened competition, retailers Moving forward, despite market are optimistic of Johor Bahru’s retail uncertainties, the pipeline of mega market. Retailers making their debut in property developments, notably RAPID the city include Harvey Norman, Texas in Pengerang, R&F Princess Cove Chicken, Wendys, GSC Cinema, Jaya Development, Desaru Coast Water Grocer and San Francisco Coffee. Themed Park to name a few, will create more job opportunities as well as UEM Sunrise Berhad, via its wholly- complement the other property sub- owned subsidiary UEM Land Berhad, sectors such as residential, office and is forming a 40%:60% joint-venture retail in Iskandar Malaysia and Johor in company with Singapore’s SUTL general. Enterprise Limited for the purpose of developing the existing marinas in Puteri Harbour of Iskandar Puteri into a private marina, a mega yacht marina and a public marina. The JV company will also be involved in developing and operating a proprietary yacht club, a sports centre and other complementary businesses.
The 9.4-hectare Shattuck-St Mary’s Forest City International School campus, the first global campus in the American school’s 160-year legacy and a RM1.8 billion golf resort and golf course opened in the US$100 billion (RM410 billion) Forest City project during the review period. These supporting and complementary components are expected to attract more international populace to the locality and augur well for the mega development, in line with Iskandar Malaysia’s goal to hit 3 million population by 2025. The developer is also committed to working together with the state government to deliver affordable houses in the future to fulfil local needs.
Meanwhile, in eastern Johor, the spill over impact from the mega oil & gas (O&G) project in Pengerang, Kota Tinggi can be seen with more developers shifting their focus to the area. Notable incoming developments in the locality include Desaru Park City in Bandar Penawar and Pengerang Integrated Development Project (PIDP).
23 HIGHLIGHTS KOTA KINABALU PROPERTY MARKET
In line with the general economic MARKET INDICATIONS There were a few notable announcements overview of Malaysia, Sabah’s on mixed use commercial projects and economy will grow at a slower As of 1H2018, Sabah recorded a total of development collaborations such as the pace due to global headwinds. 4,110 property transactions, circa 8.7% Star City Project, The Crown Service and 0.4% lower when measured against Suites, 360 Boulevard Bundusan, K Re-evaluation of mega projects in 1H2017 and 2H2017 respectively. Avenue and Bay Suites. The residential segment maintains its Sabah is one of the measures to Petrofiq Sdn Bhd is planning to trim the country’s fiscal deficit. dominant position with 58.9% share of property transactions during the review rehabilitate the long-abandoned Star City period, followed by the agriculture sector Project, which involves the development New project launches in Kota (23.6% share) and commercial sector of a 16-storey building consisting of a Kinabalu comprise mainly of (11.1% share) (Source: NAPIC Property shopping mall, a 200-room hotel, 200 mixed commercial developments Market Report 1H2018). serviced apartment units, office space, catering for short-term leases. international ice-skating rink and car park. Despite the decline in market activity, the overall transacted value for 1H2018 Ho Hup Group, a pioneer in Malaysia’s In the residential segment, was higher by 37.2% and 7.4% when construction and development industry, notable launches include the compared to 1H2017 and 2H2017 has launched its first brainchild in Kota 56-storey Jesselton Twin Towers respectively. This in part may be Kinabalu. Located on one of the last - the tallest iconic landmark in attributed to a major transaction relating remaining waterfront lands in the central Borneo. to oil palm estates worth RM750 million business district of Kota Kinabalu, The between Boustead Plantations Bhd and Crown Service Suites is part of a larger integrated development boasting 323 The office and retail segments Dutaland Bhd during the review period. luxurious suites, 50,000 sq ft of retail remained stagnant with more space, and the 376-room five-star building owners and operators MARKET HIGHLIGHTS Crowne Plaza Hotel. The suites with built- embracing technological The historic victory by Pakatan Harapan ups ranging from 715 sq ft to 4,852 sq ft disruption by incorporating co- in the 14th General Election has inevitably are selling from RM654,000 onwards. working space and omnichannel pave the way for new government marketing respectively. policies and institutional reform. Under Homesign Network and Borneo the new administration, several projects Kemuncak Riang Sdn Bhd held a The hotel industry in Sabah are placed under review in Sabah. These ground-breaking ceremony for their latest include the 662km gas pipeline from has witnessed a breakthrough development project called 360 Boulevard Kimanis Gas Terminal to Sandakan with the emergence of multiple Bundusan. With an estimated gross and Tawau, the Sabah International chained hotel brands. development value (GDV) of RM1.5 billion, Convention Centre (SICC) and Sabah Pan the integrated mixed development will Borneo Highway projects. Developers, offer circa 3.01 million sq ft of commercial contractors and investors are seen to space consisting of approximately adopt a ‘wait and see’ attitude. 540,000 sq ft of retail space, an eight hall cinema, an edutainment centre with co-working spaces, hotel, two blocks of office towers and 750 units of service suites on a 10-acre site within Bundusan town, Penampang.
K Avenue is the latest project by Mega City Development Sdn Bhd following the completion of Lido Avenue, its maiden project. Spanning across 4.78 acres of land in Kepayan, the project features two commercial blocks and a residential block offering 630 units. The commercial units, which come in nine different layouts with built-up areas ranging from 283 sq ft to 1,298 sq ft, are priced from RM155,000 Artist Impression of Jesselton Twin Towers. onwards.
24 REAL ESTATE HIGHLIGHTS MALAYSIA
RESIDENTIAL lease expiry at a predetermined price.
The existing supply of residential There were limited new launches of properties in Kota Kinabalu stood at residential projects in 2H2018. The review 61,820 units as of 1H2018, a slight period saw developers selling balance increase from the previous year (2017: units of current projects and launching 61,739 units). The growth of the high- new phases of existing projects. rise residential segment (condominium/ The tallest iconic landmark in Borneo, apartment) continues to outpace its the 56-storey Jesselton Twin Tower landed counterpart, accounting for will house a total of 819 condominium circa 38.9% (24,041 units) of the total units in two towers along with a three- residential stock. In terms of incoming storey commercial annexe. Capitalising supply, some 6,590 units or 80.9% on the unobstructed panoramic views, of the total 8,142 units comprise of the development promotes lifestyle condominiums / apartments. opportunities by offering a wide range of facilities for the exclusive use of its Escalating property prices and residents. The typical condominium units stringent lending regime have made sized from 649 sq ft to 2,041 sq ft, are homeownership more difficult, particularly selling from RM454,300 onwards. for first time homebuyers. As one of Bay Suites the measures to confront this on-going OFFICE Bay Suites is the latest development by issue, Sabah Housing and Real Estate The existing supply of purpose-built Remajaya Sdn Bhd on a prime site in Developers Association (SHAREDA) and office (privately owned) in Kota Kinabalu the locality of Likas Bay. The 32-storey NewParadigm Capital Markets Sdn Bhd remained stagnant at 5.08 million sq ft as development offers a total of 510 have recently signed a Memorandum of of 1H2018. The average occupancy rate business suites in standard, duplex and Understanding (MoU) to work with the was recorded at 88.8%, a slight increase dual-key configurations. The built-ups for State Government of Sabah to establish of 0.7% when compared to 2017. the standard units are from 400 sq ft to and implement a rent-to-own (RTO) 1,029 sq ft; 1,028 sq ft to 1,582 sq ft for programme in the affordable housing Asking gross rentals of prime CBD office the duplex units; and 1,267 sq ft for the segment. The RTO scheme allows tenants space remained stable, ranging from dual-key type. Selling prices start from to rent a home for a certain period of time; RM4.00 per sq ft to RM6.00 per sq ft per RM373,631 onwards. and with the option to buy before the month while non-prime CBD office space
FIGURE 4 Cumulative Supply and Occupancy Rate of Purpose-Built (Privately-Owned) Office Space in Kota Kinabalu 2013 - 1H2018
5,500 92
5,000 91 4,500 90 4,000
3,500 89
3,000 88 Occupancy (%)
2,500
Cumulative Office Space ('000 sq ft) 87 2,000 86 1,500
1,000 85 2013 2014 2015 2016 2017 1H2018 Year
Total Existing Space (’000 sq ft) Occupancy Rate (%)
Source: NAPIC / Knight Frank Research
25 command gross rentals of RM2.00 per sq The 2H2018 will see the opening of the maiden store at Riverson offers 24-hour ft to RM3.50 per sq ft per month. much anticipated Jesselton Duty Free, self-service supported by AI (artificial occupying the ground floor of Jesselton intelligence) system and cashless The greater adoption of technology Mall. To be operated by the Valiram payment method powered by image and leading to changes in work patterns Group, one of Southeast Asia’s leading facial recognition as well as machine has transformed office space trends specialist retailers, Jesselton Duty Free evident from the rapid expansion in the learning. EZY Box will be opening its will offer 12 high-end brands that include co-working segment across the globe, second outlet at Asia City Complex soon. Polo Ralph Lauren, Swiss Watch Gallery, including Kota Kinabalu. Offering flexible Other localities that have been earmarked Tumi, Versace, Godiva, TWG Tea, and workspace, it appeals to freelancers, for future expansion plans include Hugo Boss. start-ups and even larger corporations Sandakan, Tawau, Semporna, amongst looking to house remote-working France-based multinational chain of others. employees or special project teams. personal and beauty stores, Sephora, E-commerce is also gaining traction in the Regus, the world’s largest provider of has opened at Suria Sabah Shopping F&B segment with online food delivery flexible workspace, which opened its first Mall. Other fashion, specialty and beauty industry on the rise. Well-established food business centre in Kota Kinabalu at Suria & skincare brands that will make their delivery service provider, Foodpanda Sabah Shopping Mall in 2014, is looking debut at the mall include Superdry, has ventured into Kota Kinabalu and to add another flexible workspace in the Carlo Rino and Innisfree. In the food together with home-grown providers city. Meanwhile, home-grown operator, and beverage (F&B) category, new such as MoreFun and Zelda Delivery, GASpace has presence in Kota Kinabalu, international and home-grown tenants are expected to benefit from untapped Sandakan and Labuan as well as in include McDonald’s, Llao Llao, Liang demand and market potential in the city’s Kuala Lumpur, Penang and Johor Bahru. Sandwich Bar, Tealive, I Love Yoo, New food delivery service. Other notable providers that have their WK Restaurant, Dragon Palace Sabah, presence in Kota Kinabalu are Podders Ichizo Ramen, Kuo Man, and Green Mug. TOURISM & HOSPITALITY and The Protégé Hub. Dominos’s Pizza, the market leader for Sabah’s Tourism industry achieved its RETAIL pizza delivery in Malaysia has made its best performance in 2017. The state debut in Sabah by opening its first outlet The total retail space in Kota Kinabalu welcomed 3.68 million visitors with at T1 Bundusan, second outlet at The stood at 5.84 million sq ft as of 1H2018 corresponding tourism receipts of Walk, Riverson and third outlet at ITCC with no additional stock added to the RM7.82 billion. As of September 2018, Penampang. supply since 2017. Overall occupancy the State has already recorded 2.87 rate for the review period remained at a EZY Box, which operates unmanned million in visitor arrivals, reflecting a 5.1% healthy level of 86.6%. stores, has made its debut in Sabah. Its year-on-year (y-o-y) growth. According
FIGURE 5 Cumulative Supply and Occupancy Rate of Shopping Complexes in Kota Kinabalu 2013 - 1H2018
6,000 95
5,500
5,000 90
4,500 85 4,000
3,500 80 Occupancy (%) 3,000
Cumulative Office Space ('000 sq ft) 2,500 75 2,000
1,500 70 2013 2014 2015 2016 2017 1H2018 Year
Total Existing Space (’000 sq ft) Occupancy Rate (%)
Source: NAPIC / Knight Frank Research
26 REAL ESTATE HIGHLIGHTS MALAYSIA
Meanwhile, for the office sector, both TABLE 17 occupancy and rental levels of purpose- Notable Hotel Establishments in Kota Kinabalu built offices are expected to remain stable in the short term. Notable Hotel Establishments: Recently Completed The rapid growth of the e-commerce Name of Hotel Star Rating No. of Rooms industry in Malaysia has encouraged more retailers to embrace omni- Hilton Kota Kinabalu 5-Star 313 channel retailing. In the race between JW Marriott Kota Kinabalu 5-Star 332 e-commerce and brick and mortar store, omni-channel is the future of retailing Mercure Kota Kinabalu 4-Star 315 whereby retailers adopt multiple channels Ibis Styles Kota Kinabalu Inanam 3-Star 184 to reach the consumers; either by way of physical store, retailer website, social Notable Hotel Establishments: Future Supply media, inter alia for seamless experience.
Name of Hotel Star Rating No. of Rooms In view of the burgeoning tourism industry, development of human capital, Holiday Inn Express Kota Kinabalu 3-4 Star 250 establishment of tourism products, Crowne Plaza Kota Kinabalu 5-Star 367 directing tourism growth towards local i-Hotel @ JQ Central 3-4 Star 288 needs, market diversification of tourist Hotel Jen @ PacifiCity 4-Star 440 arrivals, are amongst other priorities Pullman Hotel @ KKCC 5-Star 500 in achieving sustainable growth in the industry.
Source: NAPIC / Knight Frank Research to the State Tourism, Culture and OUTLOOK Environment Minister, Sabah is on track to achieve RM8 billion in total tourism The overall residential market is expected receipts by the end of the year. to remain stable but challenging. The increasing supply of residential During the review period, there were a properties, particularly high-rise units total of 203 international direct flights into is expected to exert pressures on the Kota Kinabalu International Airport (KKIA) capital and rental markets for residential weekly, offering a total capacity of 34,537 establishments that are located within seats on a weekly basis. Direct flights areas with weak occupational demand from China alone totalled 98 weekly; and higher rate of project completions. these flights from different Chinese cities are serviced by eight different airlines There were fewer property launches with a total capacity of 16,589 seats. as many developers are in the midst Newly operated international direct routes of reviewing and repositioning their include Singapore (Air Asia & Malindo products to align with current market Air), Bangkok (Air Asia), Macao (Air Asia), demand and trend. The market reception Xiamen and Beijing (Xiamen Air). towards well-located properties is, however, expected to remain good. In In line with the positive growth seen general, various measures announced across the state’s tourism industry, the in Budget 2019, ranging from stamp hotel market in Sabah has also witnessed duty exemption, SST exemption on a breakthrough with the emergence of construction and building materials, low- several international hotel brands (newly interest financing for low-cost housing completed and upcoming). purchases, and property crowdfunding, According to the Sabah Tourism Board, amongst others are expected to address the average occupancy rates for 3 to the housing affordability issue impacting 5-star hotels in Sabah and Kota Kinabalu, the B40 households and the property are hovering at healthy levels of 70.7% overhang in selected segments of the and 73.5% respectively, as of 1H2018. housing market.
27 MALAYSIA CONTACTS Eric Y H Ooi Executive Chairman +603 228 99 668 eric.ooi@ my.knightfrank.com
Sarkunan Subramaniam Managing Director +603 228 99 633 [email protected]
VALUATION Chong Teck Seng Senior Executive Director +603 228 99 628 [email protected]
Keith H Y Ooi Executive Director +603 228 99 623 [email protected]
Justin Chee Executive Director +603 228 99 672 [email protected]
RESEARCH & CONSULTANCY Judy Ong Mei-Chen Executive Director +603 228 99 663 [email protected]
INVESTMENTS / CAPITAL MARKETS James Paul Buckley Executive Director +603 228 99 608 [email protected]
Chelwin Soo Associate Director +603 228 99 737 [email protected]
INDUSTRIAL / DEVELOPMENT LAND Allan Sim Song Len Executive Director +603 228 99 606 [email protected]
CORPORATE SERVICES Teh Young Khean Executive Director +603 228 99 619 [email protected]
RETAIL CONSULTANCY & LEASING Rebecca Phan Associate Director +603 228 99 618 [email protected]
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Kuruvilla Abraham Senior Executive Director Knight Frank Research provides strategic advice, consultancy services and forecasting to a wide +603 228 99 718 range of clients worldwide including developers, investors, funding organisations, corporate [email protected] institutions and the public sector. All our clients recognise the need for expert independent advice RESIDENTIAL SALES & LEASING Kelvin Yip customised to their specific needs. Knight Frank Research reserves the rights to revise the views Associate Director +603 228 99 612 and projections according to changes in market conditions. [email protected]
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COMMERCIAL RESEARCH ASIA-PACIFIC PRIME OFFICE RENTAL INDEX PENANG BRANCH Results for Q3 2018 ASIA-PACIFIC PRIME OFFICE Knight Frank Asia-Pacific Prime Office RENTAL GROWTH SLOWS Tay Tam Rental Index rose 2.3% quarter-on- Trade tensions uncertainty led to moderating rental growth in Q3 The global perspective on prime property and investment quarter and 6.4% year-on-year in the third quarter of 2018 While economic conditions in the Asia-Pacific remain healthy across the region, the ever- FIGURE 1 escalating trade tensions between the US and Prime Office Rental Index Executive Director Slower index growth mainly due to China has created an air of uncertainty among softer occupier sentiment over US global business leaders leading to softer rental growth this quarter as office occupiers China trade tensions delayed their major real estate decisions. In Q3 2018, Knight Frank’s Asia-Pacific Prime +604 229 3296 Office Rental Index grew 2.3% quarter-on- Despite this, we maintain our quarter to 141, slowing slightly from the 2.4% expectations for steady growth in 2018 rise seen previously, with 18 cities out of the on continued favourable economic 20 we track reporting stable or increased conditions rental growth. With economic trends across [email protected] the region still tracking positively, we maintain our expectation that the Asia-Pacific Prime Office markets will continue to see steady THE WEALTH REPORT 2018 growth for the rest of 2018.
In Australia, Brisbane rents rose 0.7% quarter-on-quarter as improving economic activity drove upgrading and inward migration demand in the CBD. Perth rents continued their subdued performance with rents up Stock Weighted Asia Pacific Index (LHS) JOHOR BRANCH 0.2%. However, ground sentiment is on the Vacancy Rates (RHS) mend with on sustained commodity price Source: Knight Frank Research growth and we could be seeing the light at the tunnel’s end soon. Melbourne’s rapid After a strong showing in Q2 2018, population and employment growth continues Bengaluru’s office market took a breather Ricky Lee to drive high levels of absorption, as rents rose and returned to a normalised steady state 2.6%. Financial capital Sydney saw rental recording a 0.4% quarter-on-quarter growth. growth of 2.5%, as it continues to experience Looking ahead, rents in India’s IT hub are tight supply. Looking ahead, economic expected to climb steadily given steady conditions in Australia remain supportive of demand and limited supply conditions. Rents Executive Director the major office markets, although the pace of in Mumbai rose 3.9% on sustained demand rental growth is expected to gradually slow in from not only the traditional finance and IT NICHOLAS HOLT Sydney and Melbourne. sectors, but also co-working operations who have been aggressively expanding in the city. Asia-Pacific Head of Research Kuala Lumpur saw rents decline -0.2% quarter-on-quarter, decelerating from the In north Asia, Tokyo’s rents continue to see +607 3382 888 “While we are starting to feel the im- -0.8% fall seen previously, as the commodity movement, rising 5.6% quarter-on-quarter, pact of the trade tensions flow through sector starts to see some signs of life on the Asia-Pacific office markets, sound on the back of strong occupier demand and sustained oil price growth and growing co- economic conditions are expected limited supply; prime vacancy within its major to support office demand and drive working sector. However, forward near- 5 wards fell to recent low of 0.95%. Hong term expectations for rental growth should Kong rents rose 2.7% quarter-on-quarter [email protected] steady rental growth across the region” remain subdued as landlords are still offering as the near full occupancy market and no Follow Nicholas at @nholtKF packages to attract occupiers. Manila foreseeable near-term supply continues to rents rose 0.8% quarter-on-quarter as the drive rents up in the world’s most expensive For the latest news, views and analysis ongoing US China trade dispute has dented office market. Shanghai’s rents remained on the world of prime property, visit sentiment for US multinationals, a large unchanged while rents in Beijing rose 0.7% Intelligence tenant demographic for Manila’s booming on steady demand from the technology BPO industry. Singapore’s rents rose 1.1% sector. quarter-on-quarter as city-states limited office supply outlook continues to favour landlords at the negotiation table. Debbie Choy Wei Yinn 2018 12th Edition Branch Head +607 3382 888 The Wealth Report 1st Edition Asia-Pacific Prime Global House Price [email protected] 2018 (Y)our Space Office Rental Index Q3 2018 SABAH BRANCH Index Q3 2018 Alexel Chen Executive Director Knight Frank Research Reports are also available at www.knightfrank.com +608 8279 008 [email protected]
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