RESEARCH

REAL ESTATE HIGHLIGHTS 1ST HALF 2014

KUALA LUMPUR BAHRU REAL ESTATE HIGHLIGHTS RESEARCH

rates in could rise by the Due to its attractive pricing, the project sq ft to RM3,000 per sq ft. Meanwhile, triplex penthouse measuring 18,000 sq ft second half of the year. received overwhelming response with all the former site of Lai Meng Primary for sale at RM25 million (or circa RM1,390 available units reportedly taken up. School at is proposed for per sq ft). The selling prices for its typical HIGH END a 60-storey twin towers project. One of units range from RM1,100 per sq ft. Expressionz Professional Suites @ Tun Supply & Demand the proposed towers will accommodate CONDOMINIUM Razak by Exsim Group of Companies Although there were significant a mix of serviced apartments, hotel and The cumulative supply of high end was launched in March 2014 at an completions totalling some 1,507 units in MARKET offices, while the other tower will house condominium in Kuala Lumpur stands average pricing of RM1,300 per sq ft. The KL City, asking prices continued to hold Grade A office. at 36,222 units following the completion project offers 447 serviced apartment firm while rents were marginally down of eight notable projects offering units of various layouts - studio, dual-key in selected less prominent schemes. In Market self-correcting with an additional 1,659 units [includes and duplex units sized from 643 sq ft to Prices & Rentals , asking prices were marginally noticeably less previews and projects that are physically completed 1,405 sq ft. As of May, it has reportedly higher during the review period while launches but pending issuance of Certificate of achieved circa 65% sales. The cooling measures have dampened rents continued to hold steady. Completion and Compliance (CCC)]. Out market activities, both primary and of the eight completions, five are located Berjaya Corporation Bhd expects the secondary. There were noticeably less With no significant completions noted in The lacklustre market in KL City and they are SOHO Suites @ take-up rate for its newly launched previews and launches in the first half of the localities of Ampang Hilir / U-Thant, performance may receive a KLCC, Six Ceylon, Suasana Bukit Ceylon, luxurious Ritz-Carlton Residences the year with many developers pulling and Mont’ Kiara, boost in 2H2014 ahead of the Laman Ceylon and VUE Residences in Kuala Lumpur to hit 60% by year-end. back as buyers adopt the “wait-and- asking prices and rents generally implementation of the goods and KL City. The remaining three projects are The upscale project, located at the see” approach. Despite lower volume remained stable. services tax (GST) in April 2015 intersection of Jalan Sultan Ismail and Dedaun and Damai206 @ Embassy Row of transactions, prices continued to Going forward, with a high supply with demand expected to pick up Jalan Ampang, consists of 287 suites in Ampang / U-Thant, and Richmond, hold firm in the secondary market. In pipeline of existing and incoming with unit sizing ranging from 1,023 sq ft Kiara 3 @ Mont’ Kiara in Mont’ Kiara. the primary market, however, sales projects, the rental market is expected to 4,284 sq ft. Average selling price starts performance for new launches were Challenging outlook with cooling Most of the newly completed projects to face further pressure amid weak from RM2,500 per sq ft. mixed depending on the location, measures implemented still in such as SOHO Suites @ KLCC, Six occupational demand in selected product and pricing amongst other key place and ahead of potential Ceylon, Suasana Bukit Ceylon, VUE Notable projects targeted for launch later locations and heighten competition factors. interest rate hike Residences and Richmond, Kiara 3 @ this year include Cecil Central Residence, between unit owners. Yields will continue Mont’ Kiara have been well received with Platinum Park Serviced Apartment and Early this year, Mulpha Land Berhad to be compressed in line with the lagging The Robertson (Tower 3) in KL City as disposed a 5-storey low-rise apartment rental market. Developers shifting focus to sales rates ranging from 97% to 100%. well as Nova Pantai @ and block known as Raintree Residence at affordable, mid-range products The developer of Laman Ceylon, with Meanwhile, the debut of more branded circa 85% sales, has reportedly revised Cecil Central Residence Resonance @ South Bangsar. Jalan Wickham, Off Jalan Ampang Hilir to and township developments residences into the Kuala Lumpur market their marketing strategy and is now Cecil Central Residence will be Hong the Government of the Islamic Republic appears to have had a positive effect on offering full furnishing package for the Kong-based Cheuk Nang (Holdings) of Iran for a total cash consideration of the pricing of new high end condominium period, reflecting developers’ concerns unsold semi-furnished units. Ltd’s premier project in the heart of Kuala RM34.30 million (or RM1,100 per sq ft on projects. on the adverse impact arising from the net floor area). The property comprises In the Ampang Hilir / U-Thant area, Lumpur. Controlled by tycoon Cecil Market Indications cooling measures announced in October 12 apartment units with floor areas Dedaun reported 85% sales rate while Chao, its unit, Martego Sdn Bhd, will 2013. ranging from 2,045 sq ft to 3,735 sq ft. Malaysia’s economy expanded strongly few owners of the fully sold Damai206 @ develop upscale residences comprising in the first quarter of 2014, posting an Embassy Row are releasing their units for The previews and launches include The three 50-storey blocks (total 832 units) In May, Amphil Corporation Sdn Bhd, exceptional growth rate of 6.2% (4Q2013: sale in the secondary market. Ritz-Carlton Residences Kuala Lumpur, with typical sizing from 569 sq ft to 2,499 the developer of the on-going Rimbun 5.1%). The robust economic performance Vortex Residence and Expressionz sq ft. The freehold project is located @ Embassy Row, officially launched its is driven by stronger expansion in A high impending supply totalling some Professional Suites @ Tun Razak in KL off Lorong Perak, facing Menara Kuala domestic demand and a turnaround 2,884 units is expected to enter the City; KL Gateway Premium Residences Lumpur and KLCC Park. Knight Frank in net exports. Bank Negara Malaysia market by the end of 2014. Ampang Hilir (Tower 2) and Inwood Residences @ Malaysia is the exclusive marketing agent (BNM) expects the economy to maintain / U-Thant will account for circa 48% Pantai Sentral Park in Kerinchi / Bangsar for the project. TABLE 1 of the total upcoming supply, followed South; DC Residency @ Damansara Completion of High End Condominiums in 1H2014 its growth momentum with GDP to range Other upcoming integrated projects that by KL City (33%), and Mont’ Kiara / Sri City in Damansara Heights; and 28 from 5% to 5.5% for the remaining are set to alter Kuala Lumpur’s skyline quarters of the year. Hartamas (19%). Some of the notable Dutamas (Tower A), TWY Mont’ Kiara and Project Location Area Total Units projects slated for completion include include the RM3.5 billion mixed use Residensi 22 (Block B) in Mont’ Kiara. SOHO Suites @ KLCC Jalan Perak KL City 480 Headline inflation edged up 0.4% to Crest Jalan Sultan Ismail, 188 Suites and “Oxley Towers” at Jalan Ampang that register at 3.4% in 1Q2014 mainly due Setia Sky Residences (Celeste Tower) Following the completion of its will comprise two 6-star hotels, luxury VUE Residences* Jalan Tun Razak KL City 272 to higher prices in the housing, energy- in KL City; 9 Madge, Madge Mansion, successful projects in KL City, ViPod serviced apartments, niche retail mall Six Ceylon Jalan Ceylon KL City 215 consumption and transport categories. Nobleton Crest, The Elements @ Ampang Residences and The Quadro Residences, and customised offices and KSK Group’s Suasana Bukit Ceylon Persiaran Raja Chulan KL City 310 developer, Monoland Sdn Bhd, held a RM4 billion Jalan Conlay project that Although BNM has kept the Overnight (Tower 1) and D’ Suria Condominium in Laman Ceylon Jalan Ceylon KL City 230 preview for its latest project, Vortex Hotel will feature three towers (a 60-storey Policy Rate (OPR) unchanged at 3% Ampang / U-Thant; One Kiara (Tower A) Dedaun Off Jalan Ampang Ampang / 38 Suites & Residence KLCC, in January to house the 5-star hotel cum serviced since May 2011, with strong domestic and The Icon Residence in Mont’ Kiara U-Thant 2014. Located at Jalan Sultan Ismail, apartments and two towers of 50 and demand, ample liquidity in the financial and The Signature in . Damai206 @ Embassy Row* Lorong Damai Ampang / 18 along the same stretch as Hard Rock 55-storey for luxury condominiums) system and low cost of borrowing leading U-Thant Compared to a total of some 16 project Café, Concorde Hotel, Menara IMC and and a 200,000 sq ft retail podium. The to household debt reaching a record level Richmond, Kiara 3 @ Mont’ Kiara Jalan Kiara 3 Mont’ Kiara 96 launches in the second half of last year, adjoining Menara Prudential, Vortex indicative pricing for the luxury serviced of 86.8% of GDP at the end of 2013, there were only nine notable previews offers 248 units of residences priced from apartments and condominiums in these *Pending Certificate of Completion and Compliance (CCC) there is strong indications that interest and launches observed during this review RM980 per sq ft up to RM1,190 per sq ft. two projects range from RM2,500 per Source: Knight Frank Research

2 3 REAL ESTATE HIGHLIGHTS RESEARCH

The focus of the residential market in the Midfields 2 address. Buildings completed during the review will be retained as national heritage Outlook short to medium term will likely be on period include Menara TH (360,000 sq buildings. The lacklustre market performance may the affordable, mid-range products and KUALA ft NLA) in KL City Centre and Menara With the cooling measures implemented receive a boost in 2H2014 ahead of OSK Holdings has obtained development township developments. Well-conceived Kembar Bank Rakyat (962,582 sq ft NLA) still in place, the outlook for the high the implementation of the goods and approval for the parcel of land adjoining projects with potential access to public in KL City Fringe. end condominium is expected to remain services tax (GST) in April 2015 with LUMPUR Plaza OSK at Jalan Ampang. Work on transport links such as the on-going Light challenging ahead of potential interest demand expected to pick up. Menara TH is a 38-storey office building the project which will yield 1 million sq ft Rail Transit (LRT) Extension and the Klang rate hike. OFFICE within the RM4 billion prime integrated of lettable commercial and retail space Valley Mass Rapid Transit (MRT) lines Moving forward, the rejuvenation of development of Platinum Park. The is scheduled to start in the fourth quarter The high end residential segment is are expected to be in demand. The latest prime tracts in KL City evident by the building which adjoins NAZA Tower was this year. expected to experience a temporary offering by YTL Land & Development saw high number of on-going and upcoming MARKET acquired by Lembaga Tabung Haji in slowdown in demand as upgraders 650 units of its Midfields 2 project (total: development projects will further Impian Bebas Sdn Bhd, a 50:50 joint- 2009 with the sale completed in 1Q2014. and investors may opt to delay big- 792 units) snapped up during a weekend. transform the landscape and skyline of venture (JV) entity between Sapura ticket purchase in anticipation of Competitively priced from below RM500 the city as it moves closer to fulfilling its Office market to display resilience Menara Kembar Bank Rakyat is a twin Resources Bhd and KLCC Holdings higher financing cost and cost of per sq ft, the recent confirmation of the vision of becoming ‘A World-Class City’. in short term amid widening gap tower office development on a 3.8-acre Sdn Bhd, plans to develop commercial living. Key factors such as location, high-speed rail (HSR) project from Kuala In the Economist Intelligence Unit (EIU) between supply and demand tract at the intersection of Jalan Bangsar buildings on a prime parcel of land pricing and marketing strategies, Lumpur to Singapore with the terminal 2013 Liveability Ranking of 140 cities, the and Jalan Travers. Tower 1 which is measuring 1.88 acres at Jalan Kia Peng. availability of financial-related packages th located at in Sungai capital city of Malaysia, ranked 78 , is the Prime office rents may continue 38-storey high will be occupied by Bank The components, comprising a 46-storey (e.g. discounts, free legal fees etc.), Besi set to be completed by 2020, second most liveable city in South-East Rakyat as its new corporate headquarters office tower, a three-storey convention developer’s reputation and development to experience moderate growth greatly adds to the attractiveness of the Asia, after Singapore. albeit at slower space with Grade while the 32-storey Tower 2 will be centre, a retail podium and a seven- concept in terms of product, quality, available for rental. storey basement car park, will have total A supply remaining constrained facilities / amenities and services will play gross floor area (GFA) of 1.64 million despite recent completions Later into the year, three office buildings crucial roles in the success of upcoming sq ft. The project is expected to be with combined NLA of more than high end residential launches. TABLE 2 completed by end-2019. 1.0 million sq ft space are due for Average Asking Prices and Rentals of Existing High End Condominiums Opportunity for owners and Meanwhile, the Government, had on completion. They are Menara Hap Seng YTL Land & Development Bhd plans to th investors of old and dated 15 May, enforced an initiative to curb 2, Menara Bangkok Bank and Menara construct a 42-storey office tower on a Locality Asking Gross Rental Average Asking Price office building to undertake speculative activity by the so-called ‘Real (RM psf / month) (RM psf) MBMR. 0.75-acre site located between Menara Estate Investors Club’ who practises asset enhancement initiatives Keck Seng and Dorsett Regency Kuala KL City* 2.80 - 5.50 680 - 1,700 The average occupancy in KL City Centre collective purchase of real estate for / renovation, conversion and Lumpur. The development which bears remained unchanged at 83.2% despite subsequent sale at a higher price for Ampang Hilir / U-Thant 2.30 - 4.00 500 - 1,100 redevelopment to optimise a Jalan address could be notable improvements in take up due easy profit. Developers are now required Damansara Heights** 2.50 - 4.00 650 - 950 returns on their assets the new headquarters for the group. The to the recent completion of Menara to register the name of buyers of more Kenny Hills 2.00 - 3.20 500 - 900 new office tower which may be named than four houses at one time with the TH which has yet to record significant Bangsar 2.50 - 4.50 600 - 1,200 Bintang Plaza is likely to be linked to The occupancy. Average occupancy in KL Urban Wellbeing, Housing and Local Ritz-Carlton via a bridge in the future. Mont’ Kiara*** 2.30 - 3.50 450 - 750 City Fringe, however, rose slightly to Government Ministry. Separately, the group also intends to * Excludes Binjai On The Park Market Indications record at 83%. develop an integrated project on its The high level of existing supply coupled ** Includes Twins @ Damansara Heights The Kuala Lumpur office market showed Despite the widening gap between 3.26-acre site along , with the impending entry of some 2,884 *** Excludes Verve Suites which comprise mainly fully furnished small units resilience in 1H2014 with both rental and units expected by the second half of supply and demand, announcements on sandwiched between Yayasan Tun Source: Knight Frank Research occupancy rates holding firm despite proposed and new office developments Abdul Razak and Prince Court Medical 2014 will exert pressure on both rental further completions. The tenant-favoured continued unabated. Centre. This development will feature and secondary sales market, particularly market continued to provide wider choice two 45-storey office blocks amongst its in locations where there are weak to occupiers seeking office space for The much-talked about 118-storey FIGURE 1 mixed use components. occupational demand and significant Projection of Cumulative Supply for High End Condominiums relocation and expansion purposes. project of Warisan Merdeka project completions. 2009 – 2015(f) has finally moved to the construction Following the recent relocation of Lai During the review period, there was phase following the first contract award Meng Primary School to Bandar Bukit limited activity (in terms of volume) in to Pintaras Jaya Bhd. Scheduled for Jalil, Magna Prima Bhd has taken the investment market in line with the completion by 2020, the skyscraper possession of its crown jewel, the cautious outlook. Developers, however, towering above the iconic Petronas 2.62-acre site at Jalan Ampang which it continued to announce more new Twin Towers (at > 500 metres), will have purchased from Lai Meng Girls’ School integrated projects with office space as net floor space of 2.2 million sq ft. PNB Association (LMGSA) in March 2010. One an integral component. and its subsidiaries are expected to of its proposed 60-storey twin towers occupy about 70% of the space with the will accommodate a mix of serviced Supply & Demand remaining (circa 20 floors) to be available apartments, hotel and offices, while the for lease to multinational corporations. other tower is expected to be a Grade A In 1H2014, the cumulative supply of The mixed use development, costing office building with Green Building Index purpose built office space in KL City some RM5 billion on 19 acres within (GBI) elements. Centre was recorded at 48.6 million sq ft the enclave of Merdeka Stadium and In KL City Fringe, there are plans by while in KL City Fringe, it was recorded Stadium Negara, will also comprise a Impian Ekspresi Sdn Bhd, a company Source: Knight Frank Research at 21.5 million sq ft. This brings the mall, a public park, a luxury hotel and controlled by Tan Sri Desmond Lim, the Note: [e] = estimate; [f] = forecast total cumulative supply of office space four residential blocks. The two stadiums in Kuala Lumpur to 70.1 million sq ft. executive chairman of Malton Bhd and

4 5 REAL ESTATE HIGHLIGHTS RESEARCH

chairman of Pavilion REIT, to re-build Delivery Centre in . The its 9.58-acre tract in Pusat Bandar 300,000 sq ft centre, which has GBI TABLE 3 TABLE 4 Damansara. The existing nine office Gold certification, is IBM’s 21st shared Selected Grade A Office Asking Office Investment Sales 1H2014 blocks of six and seven-storey high on services centre in Malaysia. It is the latest Rentals the site will be demolished and the site addition to IBM’s extensive network of Building Name Location Approx. Lettable Consideration Area (sq ft) (RM) / (RM psf) redeveloped with 11 buildings to be service delivery hubs in 20 countries that Building Name Asking Gross Rental (RM psf / month) made up of a 57-storey hotel and office provides business processing and IT Platinum Sentral (1) KL Sentral 475,857 750,000,000 (1,576) tower, two 25-storey, two 22-storey services capabilities to clients worldwide. Menara Maxis 10.50 Menara PJD (2) Jalan Tun Razak 445,112 220,000,000 (494) and four 14-storey office blocks, two Notable investment activity in 1H2014 (as Menara Darussalam 8.50 Tower 1, Avenue 3, 61,700 72,540,000 (1,176) 50-storey buildings to accommodate (3) of May) totalled some RM1.18 billion. Integra Tower 11.00 The Horizon 516 serviced apartments and a seven- Vista Tower 8.50 - 9.00 Bangunan Shell Malaysia (4) Damansara Heights 212,857 138,000,000 (648) storey podium that will feature a lower PJ Development Holdings Bhd entered (1) ground floor and three basement floors. into a sale and purchase agreement with G Tower 8.50 As at March 2014, Platinum Sentral has a total NLA of 475,857 sq ft as per tenancy schedule (excluding licensed area / outdoor / terrace) made up of office: 419,643 sq ft and retail: 56,214 sq ft. Able Starship Sdn Bhd on 31st December Menara Binjai 8.50 The project with an estimated GDV in (2) The Sales and Purchase Agreement was entered into on 31st December 2013. Menara PJD is solely excess of RM2 billion to RM3 billion, will last year to dispose of its Menara PJD, Menara Prestige 7.50 - 8.50 tenanted by Jabatan Kerja Raya Malaysia until 31st October 2015. be developed over a period of five to six a 28-storey office tower at Jalan Tun Quill 7 7.80 (3) The Sales and Purchase Agreement was entered into on 31st December 2013. The existing tenancies with years with the first phase (office blocks) Razak, for a total cash consideration of UOA Holdings Sdn Bhd, UOA Development Bhd and other tenants will be terminated upon completion of the Menara Shell 7.00 disposal. UOA will then lease the building from the purchaser for RM362,700 per month for 3 years (Gross slated for completion in three to four RM220 million. The property comprising Nu Tower 1 & 6.50 yield of 6% for the purchaser). years. five floors of retail / commercial / office, Nu Tower 2 (4) Bangunan Shell, completed in 1986, is a 12-storey purpose-built office building with a basement car park eight floors of car park and 16 floors of linked to Wisma Chase Perdana via a common ramp. Meanwhile, within , the Federal Menara TH Menara CIMB 8.00 commercial / office properties with a Source: Knight Frank Research Administrative Capital of Malaysia, The Gardens North 7.80 link bridge to the Light Rail Shapadu Corp Sdn Bhd plans to launch & South Towers Transit station has a gross built-up area a RM600 million mixed use project to companies begin to look for options Source: Knight Frank Research of 796,355 sq ft. It is solely tenanted be known as Shapadu City Village later outside of the overcrowded city centre. FIGURE 2 by Jabatan Kerja Raya Malaysia until Occupancy and Rental Trends this year. The 2.4-acre freehold site in The Pinnacle in Bandar Sunway, a 31st October 2015 (built-up area of 2005 - 1H2014 Precinct 1, adjoining the premises of the rents between RM8.50 per sq ft and 27-storey Grade A MSC-status compliant 445,111.84 sq ft). Ministry of Finance (MoF), will feature a RM9.00 per sq ft. The building is currently office tower (580,000 sq ft NLA) with Grade A office tower housing Shapadu’s Since the signing of a heads of 80% occupied with notable tenants that Green Building Index (GBI) and Building new headquarters, a luxury hotel, agreement (HOA) in January, Malaysian include Hyundai Corp, the Embassy of & Construction Authority (BCA) Green lifestyle retail outlets, and 150 high-end Resources Corp Bhd (MRCB) has inked Czech Republic, Thomson Reuters and Mark certifications, has seen encouraging condominium units. a RM750 million deal to sell its Platinum BNP Paribas. Integra Tower, meanwhile, take up of circa 50% since its completion Sentral property in KL Sentral to Quill is a 40-storey office building launched in January 2014. The building with large Capita Trust Bhd (QCT). The transaction, in mid-2013. The building with 777,000 floor plates of between 23,000 sq ft and Prices and Rentals said to be the first of its kind in the sq ft of lettable space boasts one of 24,000 sq ft, offers competitive rental country, will see construction-cum- the largest floor plates in the market, at Despite Grade A supply increasing with rates. Its tenants include Pepsi-Cola, property developer, MRCB, becoming the 25,000 sq ft per floor. Anchored by Aker recent completions, average achieved Huntsman, Ecolab, Hitachi, Ausenco, single largest shareholder of QCT, as well Solution, it is currently 50% occupied rental rates in both KL City Centre and Roche and Johnson & Johnson. The as the owner of its management vehicle. with other notable tenants that include KL City Fringe, remained firm. During the Pinnacle is strategically located within Platinum Sentral comprises five blocks JPMorgan, Michael Page and Petronas review period, average achieved rental walking distance to Halt 3 of the on-going of four- to seven-storey commercial Lubricants. rates in both KL City Centre and KL City elevated BRT - Sunway line which will be buildings housing office-cum-retail Fringe saw marginal increases recording linked to Setia Jaya KTM station and LRT space, a multi-purpose hall and two at RM6.08 per sq ft (2H2013: RM5.96 line in USJ. Outlook per sq ft) and RM5.55 per sq ft (2H2013: levels of car parks. Its office space, with Source: Knight Frank Research RM5.52 per sq ft) respectively. Prime A During the review period, there were 419,643 sq ft NLA, is fully occupied while In the short term, the Kuala Lumpur and Prime A+ grade offices in both KL several notable occupier movements. its 56,214 sq ft retail portion is 77% office market is expected to display initiatives / renovation, conversion Malaysia’s upgrade in the 2014 World City Centre and KL City Fringe continue occupied. resilience. The market is characterised Fuji Xerox, the world’s leading document and redevelopment, may present an Competitive Yearbook Ranking by to command high asking rents ranging by an overhang of secondary supply with solutions provider, marked the launch New York-based BlackRock Inc, the opportunity to owners and investors of global business school, IMD, climbing between RM6.50 per sq ft and RM12.00 limited Grade A space. Prime office rents of its first ever sustainability report world’s largest asset manager, is old and dated office buildings to bridge 3 rungs to 12th place amid the slide of per sq ft per month. may continue to see moderate growth at the opening of its new Malaysian planning to sell The Intermark, a RM2.2 the gap in Grade A supply and optimise most big emerging markets is a positive albeit at slower pace. With the rapid development of public headquarters, occupying Levels 23, 23A billion integrated development at Jalan returns on their assets. Buildings that development for the country. Coupled transport links such as the Light Rail & 25 of Menara Binjai in Kuala Lumpur’s Tun Razak with total NLA of 2.5 million The relatively high vacancy rate and have been earmarked for these initiatives with the various Government policies and Transit (LRT) extension, Bus Rapid Golden Triangle. sq ft, housing the Intermark Mall, Vista impending completion of more dual include Wisma Hong Leong at Jalan incentives to lure companies to set up in Tower, DoubleTree by Hilton hotel Transit (BRT) and Mass Rapid Transit Tradewinds Corporation Bhd relocated compliant (MSC + Green) buildings Perak and Wisma Megah (formerly known Malaysia and supported by a booming and Integra Tower. A separate deal is (MRT) which will greatly enhance from its office at Wisma Zelan, Bandar will likely impact rents and occupancy as Bangunan Hong Leong) at the corner shared services and outsourcing (SSO) reportedly being worked out to hive off accessibility and connectivity within Tun Razak to Menara Shell in KL Sentral, rates of secondary office buildings of Jalan Tun H S Lee and Jalan Tun Tan industry in the region, these augur well the hotel for an estimated RM350 million. Klang Valley, demand for good grade taking up circa 30,000 sq ft of space on as competition heightens between Cheng Lock. for the office market. Vista Tower which opened in 2010 is a office space has started to extend Levels 17 & 18. landlords seeking to retain existing beyond KL towards Greater KL as 62-storey Grade A building with 555,000 tenants. Thus, asset enhancement IBM recently launched its new Global sq ft of floor space, commanding monthly

6 7 REAL ESTATE HIGHLIGHTS RESEARCH

(4Q2013: 3.9%). It is expected to receive years ago, opened its first boutique in flagship store at The Gardens Mall, the retail category at the Federation of a boost from the FIFA World Cup in South East Asia, at the Indulge Floor of fifth in Malaysia, catering to all tea lovers. International Real Estate (Fiabci) Prix KLANG June and the Hari Raya Aidilfitri festive while another entrant in d’Éxcellence Awards 2014. It has also American dining chain, Johnny Rockets, season in July, with projected 7% and the jewellery business is India-based won The Edge-PAM Green Excellence continues to expand. It opened its 6.3% expansion in the next two quarters Joyalukkas which opened its largest Award and Fiabci Malaysia Property VALLEY second outlet at Avenue K recently respectively. showroom at Jalan Masjid India, Kuala Award 2013 (winner in the retail and this will be followed by two more Lumpur. category). RETAIL openings at and KLIA2 The review period saw timeless British later this year. By the end of 2014, an impending retail Supply & Demand Monki @ Nu Sentral luxury brand, Mulberry and Kate Spade supply measuring some 3.7 million sq ft MARKET Meanwhile, South Korean fried chicken The review period saw the opening of five New York opening their second and third is slated for completion from shopping franchise opened its first halal KyoChon shopping malls contributing a combined flagship outlets at centres that includes GLO Damansara, 1 Mont’ Kiara saw the completion of its outlet at the Shopping Centre. Malaysia, a maturing market NLA of approximately 1.8 million sq respectively. It also marked the arrival D’Pulze , The Place @ asset enhancement initiative (AEI) during with rapid store expansion ft, bringing the cumulative supply of of TOMS, the socially conscious brand The newly unveiled TREC lifestyle and One City, Mall, Atria Shopping the review period. The mall remained retail space in the Klang Valley to circa popular for its shoes. TOMS will now be entertainment hub on a 7-acre site Gallery, IOI City Mall and Gamuda programmes by both domestic open for business throughout the whole 46.5 million sq ft. The new completions available at selected Isetan department along Jalan Tun Razak, opposite the Walk. These completions will bring the and international players, is refurbishment process which provided a include Nu Sentral, Encorp Strand Mall, stores, in KLCC and The Gardens. upcoming (TRX), cumulative supply to circa 50.1 million reportedly on the radar of new new and more open façade, helping to Gateway @ KLIA2, The Main Place @ USJ on land owned by the Royal sq ft. international retailers strengthen the retail image of the mall Popular Japanese fashion brand, Uniqlo, 21 and the redeveloped Jaya Shopping Golf Club, will assimilate a variety of from street side as well as better vertical continues to expand with two latest store Prime and established shopping centres Centre. It also saw the re-opening of styles, atmospheres and moods into five connectivity, enabling shoppers to have openings in May, at Nu Sentral and Johor in Klang Valley, both in the city centre Paradigm shift in consumer which was closed for separate zones offering casual and fine greater access to all levels of the mall. Baru City Square. Uniqlo aims to further and suburbs continue to enjoy good shopping habits in recent refurbishment. dining, independent cafes, wine bars, H&M opened its 9th outlet with 15,000 sq strengthen its business in Malaysia by occupancies (> 90%), these include Suria years which may be summed pubs, lounges and clubs. Offering a Meanwhile, the scheduled openings of ft of retail space over two floors replacing opening outlets in and as KLCC, Pavilion Kuala Lumpur, Mid Valley as “Destination versus NLA of 200,000 sq ft, the development GLO Damansara (previously known as G Tony Roma’s. well as states in the east coast. Megamall, The Gardens Mall, Sunway Convenience” will pioneer the one-stop integrated Avenue), D’ Pulze Shopping Mall and The Pyramid, 1 Utama Shopping Centre, The trend of international retailers The food and beverage segment which entertainment district that has made the Place @ One City in 1H2014 have been Empire Shopping Gallery, Subang seeking an entry into Malaysia, a continues to report steady business likes of Hong Kong’s Lan Kwai Fong, Outlet mall concept gaining deferred to later this year. Parade, The Mines, Setia City Mall and maturing market, is expected to continue operations continues to attract new Shanghai’s Xin Tian Di and Singapore’s popularity across the country Paradigm Mall. Nu Sentral, which had its soft opening in growing in tandem with the rapid store players. Clarke Quay. The first phase of TREC is with several outlets slated for 1Q2014, has good growth potential due expansion programmes by both domestic expected to be completed in 1Q2015. Juan Valdez, Colombia’s iconic coffee opening in 2014 and beyond to its enviable position within the CBD of and international players. Kuala Lumpur Sentral. Stesen Sentral, house and Caffe Bene, a South Korean For the fourth time, Sunway Pyramid was the nation’s largest transit hub which The rejuvenated Avenue K continues themed cafe, debut the increasingly named the ‘Best Shopping Mall’ in the With consumers adopting a more to attract established and new retail sophisticated coffee-drinking market in Malaysia Tourism Awards 2012 / 2013, prudent spending approach amid currently supports six rail networks - the KLIA Express Rail Link, KLIA Transit, brands with Korea’s popular lingerie store Malaysia with the launch of their cafes at having previously received the award in rising cost of living, retail market RAPID KL (Putra), KTM Komuter, KTM Yescode making its country debut and The Intermark mall and Sunway Pyramid 1998, 2004 and 2010 / 2011. outlook to remain cautiously ELLE lingerie opening its second outlet respectively. Intercity and KL Monorail Services enjoys Setia City Mall, Malaysia’s first green optimistic (after Sunway Pyramid). The mall is also high footfall of transit riders and this The review period also saw the launch retail mall, was accorded international home to the country’s largest outlets of augurs well for the newly opened mall. of TWG Tea Salons & Boutiques elegant recognition with the gold award in the With 650,000 sq ft NLA, the nine-storey Swedish mega brand H&M, theSkintopic, Green status mall offers some 287 retail The Mod House and Original Classic Market Indications lots for lease with notable anchors and while boasting the largest MUJI and TABLE 5 Cotton On stores in South-East Asia and Malaysia’s economy expanded 6.2% in tenants that include , Hush Shopping Centres Scheduled for Completion / Opening in 2H2014 Asia, respectively. H&M Home collection 1Q2014 (4Q2013: 5.1%) driven by strong Puppies, Sephora, Machines, Cotton On, will also be making its way to H&M domestic demand and a turnaround in L’occitane, Starbucks, O’Briens and Tony Avenue K come end July 2014, the first in exports. For the subsequent quarters, Roma’s. Monki, the trendy Scandinavian South East Asia. the central bank expects growth to be brand owned by H&M made its debut at within the 5% to 5.5% range as exports Nu Sentral, its first store in Malaysia and Malaysia is reportedly on the radar of momentum continues to improve and South East Asia, occupying circa 2,600 French and Japanese department store advanced economies resume their sq ft of space. operators, Groupe Galeries Lafayette recoveries. The re-opening of and Takashimaya Co Ltd, both exploring entry into the domestic retail market. The Malaysian Consumer Sentiments with a new tagline ‘The Heart & Soul of Index (CSI) remained below the 100-point PJ’ sees the return of 30% of its original Meanwhile, existing operators such as threshold of confidence (1Q2014: 96.8 tenants. Anchored by Cold Storage and Aeon Co (M) Bhd and Parkson Holdings points) despite gaining 14.4 points over TGV Cinemas, the neighbourhood mall Bhd continue to announce plans for the preceding quarter which recorded with 270,000 sq ft NLA has a designated new store openings and expansion the lowest reading in almost five years. “nouveau entrepreneur” zone offering nationwide. Retail sales grew by 4.9% in 1Q2014, smaller lots from 100 sq ft to 800 sq ft London-based Garrard, the world’s close to the forecast figure of 4.8%, an for rent on Level 4 to foster local retail oldest jewellery house founded 278 improvement from its preceding quarter entrepreneurship. Source: Knight Frank Research

8 9 REAL ESTATE HIGHLIGHTS RESEARCH

contributor to the country’s economy in brand new 400-room Tune Hotel KLIA2 Prices and Rentals 2013, contributing some RM51.5 billion on 9th May. KUALA to its Gross National Income (GNI). Prime retail space continues to record During the review period, Malaysia higher rates from new and renewed The country marginally missed its 2013 welcomed Saudi Arabia’s first low cost leases. LUMPUR target of 26 million arrivals despite carrier, Flynas. Flynas will serve the Kuala IGB REIT’s gross rental income grew by posting a 2.7% gain y-o-y, with arrivals Lumpur – Jeddah flights three times a robust 12.6% y-o-y due to tenancy HOTEL recorded at 25.72 million (2012: 25.03 weekly. The budget airline also launched renewals at both million). This was due to the delayed its new long-haul flight routes to Europe, and The Gardens Mall last year; 33% of MARKET opening of KLIA2 and the critical Asia and Africa. Meanwhile, Air Asia, the NLA at Mid Valley Megamall and 54% haze condition in mid-2013 amongst Malindo and Firefly are also increasing at The Gardens Mall were reportedly other reasons. On the contrary, tourist flight frequencies to existing destinations renewed at a higher rental rate of 15%. Kuala Lumpur, the capital city, is receipts, performed above expectation, and adding new routes in support of the posting 8.1% growth y-o-y to record VMY 2014 campaign. Meanwhile, KLCC Property Holdings the eighth most affordable in the at RM65.44 billion (2012: RM60.56 Bhd also reported higher revenue from world for a city break according The Malaysia Convention and Exhibitions billion), reflecting higher average tourist its retail rental which went up by RM4.4 to TripIndex Cities, offering some Bureau (MyCEB), established with a spending of RM2,544.90 per capita million or 3.7%, resulting from higher of the most reasonable first class mandate to grow business tourism in rates achieved from rental reviews. (2012: RM2,419.10) in line with the broad (4 / 4.5-star) hotel room rates in Malaysia, specifically in the area of objectives of the National Key Economic meetings, incentives, conventions and the world Areas (NKEA) and Malaysian Tourism exhibitions (MICE), expects business Outlook Transformation Plan (MTTP) to increase Jaya Shopping Centre tourists to contribute some RM20.3 yield per tourist. The retail industry has seen a huge More international and regional billion to the national economy this year. paradigm shift in consumers’ shopping operators / brands are set to ASEAN countries remained the largest This is based on the increased awareness make their debut in the country habits in recent years that may be The concept of outlet malls has also contributor of tourist arrivals, accounting of Malaysia as a destination for MICE summed as “Destination versus gained popularity in the country. supported by a resilient tourism for approximately 74.3% share of total events coupled with the country’s value Convenience”. Most consumers expect Notable upcoming outlet malls include industry with consistent growth arrivals. Cambodia and Vietnam are the for money proposition and diverse their shopping experience to be of a Mitsui Outlet Park KLIA in Sepang, KL in tourist arrivals and tourist two ASEAN countries that registered culture. certain standard, yet affordable at the receipts double-digit growth at 28.6% and 11.7% International Outlets (KLIO) in Dengkil, Malaysia recently bagged three top same time for their income range. With y-o-y. Although arrivals from Brunei Genting Premium Outlets in Genting honours at the Travel + Leisure India & heightened competition in the horizon, Darussalam and Thailand contracted Highlands, Penang Designer Village, In conjunction with “Visit South Asia Magazine India’s Best Awards shopping centres are reinventing 1.5% and 8.4%, these two countries Freeport A’Famosa Outlet Village in Alor Malaysia Year 2014,” the country 2013. The country won The Best Green themselves into multi-dimensional retail remained Malaysia’s top five countries Gajah and Sunway Ipoh Premium Outlet. welcomed 7.09 million tourists Destination (World) 2013 award while and lifestyle destinations to attract in tourist arrivals at 3rd and 5th position for 1Q2014, reflecting a 10% Langkawi picked up the Best Honeymoon consumers. The outlook for the local retail industry respectively. China, ranked 4th position, Destination Runners-up award and the remains cautiously optimistic with growth y-o-y. The ASEAN saw an upsurge in arrivals posting a There is also a decreasing trend in Kuala Lumpur International Airport (KLIA), consumers adopting a more prudent region continued to be largest notable 14.9% growth. volume of local shoppers traffic in KL spending approach due to rising cost of contributor of tourist arrivals with the Best Airport (World) Runners-up City as international and regional brands living. The expansion in the retail industry 72.1% share For the first quarter of the year, the award, respectively. vigorously expands and targets the country welcomed 7.09 million tourists, which moderated to 4.5% in 2013 (2012: Malaysia also bagged the Best Family suburban malls making it more reachable a 10% improvement from the same 5%), is expected to experience a general Destination Award at the Lonely Planet as well as convenient for shoppers. Being The opening of KLIA2, the period last year. Tourist arrivals from slowdown going forward in anticipation of Magazine India Travel Awards 2014. a retailer’s market, landlords continue the likely hike in overnight policy rate and world’s largest purpose-built China, however, moderated to record at to strive to maintain the exclusivity of lower tourist arrivals due to the recent low-cost terminal, is expected 5.5% growth (2013: 14.9%) following the Malaysia maintained its position as the shopping malls particularly in KL City. aviation tragedy which has temporarily to boost the country’s aviation aviation tragedy (MH370) in March. world’s friendliest destination for Muslim Hence, the retail industry should work sector travellers in this year’s rankings for “halal” halted international campaigns for Visit Nu Sentral The Ministry of Tourism and Culture towards grooming the local retailers to friendly holiday destinations released by Malaysia Year (VMY) 2014 in China, one which has temporarily postponed its be the point of differentiation between Singapore-based Muslim travel specialist of the top five countries in terms of tourist road show to promote Visit Malaysia shopping malls. Crescentrating, an accolade it has arrivals. Year (VMY) 2014 in China, is now shifting enjoyed since 2011, ahead of countries Market Indications its focus to other countries that include such as the United Arab Emirates, ASEAN member countries, India, Middle Malaysia’s overall ranking in The Travel Turkey, Indonesia, Saudi Arabia and East and Europe. & Tourism Competitiveness Index Singapore. In 2013, tourist arrivals from 2013 improved by one position to 34th The long awaited Kuala Lumpur Muslim countries accounted for circa place since the last report by the World International Airport 2 (KLIA2), the world’s 23% of total arrivals to the country and Economic Forum in 2011. The country, largest purpose-built low-cost terminal in conjunction with VMY 2014, Malaysia ranked 8th in the Asia Pacific region, is for low cost carriers with a capacity to targets to attract more tourists from this one of the three South East Asia nations serve 45 million passengers annually, niche market. that made it to the top 10, with Singapore finally commenced operations on 2nd holding top rank and Thailand at 9th place. May. It currently hosts about 10 frills-free The tourism industry was the sixth largest airlines. Tune Hotels has also opened its

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operate at Phase One of Empire City Supply & Demand FIGURE 3 @ Damansara while a third brand, The Supply and Occupancy Rate of Selected 4-Star & 5-Star Hotels in KL City With no completion in 1H2014, the Ritz Carlton, may also open at Empire 2005 - April 2014 cumulative supply of 5-star hotel rooms City 2. The developer, Mammoth Empire remained unchanged at 11,530. Group, is also planning to add two more WOLO hotels – one at Empire Remix The review period saw the opening of USJ Subang and another at Jalan Tun the 319-room 4-star Silka Cheras Kuala H S Lee to its existing portfolio. There Lumpur. Managed by Dorsett Hospitality are plans to convert the existing Wisma International, the hotel adjoins the Megah (formerly Bangunan Hong Leong), refurbished Cheras Sentral Mall (formerly located at the corner of Jalan Tun HS Lee Plaza Phoenix). With this opening, the and Jalan Tun Tan Cheng Lock, into a cumulative supply of 4-star hotel rooms 188-room boutique hotel. increased to 8,567. The Hainanese coffee shop, Yut Kee at The Ritz Carlton, Kuala Lumpur As at June 2014, the total cumulative Jalan , will make way for an supply of both 4-star and 5-star hotel 8-storey 80-room boutique hotel with rooms in Kuala Lumpur stood at circa a restaurant on the ground floor. The brand’s hotel within a hotel offering. on the site. It will feature two 6-star 20,097. proposed boutique hotel will sit on two Fairmont Kuala Lumpur will also feature hotels, posh serviced apartments, a niche shoplots with combined land area of During the review period, the average six dining outlets as well as 30,000 retail mall and MSC-status custom- about 4,000 sq ft land. occupancy rate for selected 4-star sq ft of meeting and banquet space built offices. The company will seek hotels declined significantly by 7.9% to and recreational facilities including a international hotel operators from the record at 68% (2H2013: 74%) while for swimming pool, health club and spa. United States and the Middle East who Average Room Source: Knight Frank Research / MIHR 5-star hotels, it remained unchanged The integrated project will also comprise will operate in Malaysia for the first time. at 75%. Notable 4-star hotels that one high-rise office tower which will be Five-star hotel chains, Jumeirah and Rates & Capital achieved occupancy levels in excess of connected to a six-storey retail podium. Waldorf Astoria, are speculated to have Value Outlook FIGURE 4 80% include Hotel Royal (formerly The shown interest in the development. Average Room Rate of Selected Coronade Hotel Kuala Lumpur), Dorsett TA Global Bhd, one of the largest According to TripAdvisor’s TripIndex The opening of KLIA2 will significantly 4-Star & 5-Star Hotels in KL City Regency, Melia Kuala Lumpur and landowners in the KLCC vicinity, is KSK Land Sdn Bhd, the property arm of Room Service 2014, Kuala Lumpur has boost the country’s aviation sector and 2005 - April 2014 Novotel while those in the 5-star category actively looking to develop its 2.47- KSK Group Bhd, has recently completed some of the most reasonable first-class play a pivotal role in lifting Malaysia’s include JW Marriott, Le Meridien, Park acre car park lot into a five-star hotel the acquisition of a 3.95-acre piece of (4 / 4.5-star) hotel room rates in the appeal as a transit hub for low-cost Royal, Shangri-La and Grand Millennium. cum serviced apartment project. The land in Jalan Conlay, next to Prince Hotel world. The capital city came in fifth out carriers. This coupled with the entry project, tentatively known as TA 3 and & Residence, also for RM3,300 per sq ft. of 48 countries in terms of combined and expansion of luxury hotel brands, Malaysia’s hospitality industry continues TA 4 is strategically located along Jalan It plans to develop a mixed use project, room service item prices and room rates catering to the growing needs of to attract the interest of international and P Ramlee, Kuala Lumpur, just across 8Conlay, consisting of three towers and (RM437.85). high-end travellers, augurs well for the regional operators. the Petronas Twin Towers. According a 200,000 sq ft retail podium. There will hospitality industry. to TA Global’s annual report, TA 3 and be a 60-storey tower housing a 5-star Kuala Lumpur has also been named the The integrated development of Pavilion The country’s target for VMY 2014 4 will comprise twin buildings that will hotel and serviced apartments and two eighth most affordable destination in Kuala Lumpur will see the addition of a remains at 28 million tourists and RM76 house a five-star hotel and a branded 50 and 55-storey luxury condominium the world for a city break, according to RM330 million 5-star hotel, the last of billion in tourism receipts despite the serviced residence with a four-level blocks. KSK is considering between TripIndex Cities, a TripAdvisor annual its four major components. The 329- recent aviation tragedy. Promotional podium of retail, food and beverage Kempinski and Nevada-based gaming cost comparison study. room Royale Pavilion Hotel is slated campaigns in other countries as well as outlets and lifestyle facilities. Building and hospitality company, MGM Resorts As at April 2014, average room rates for completion in 2016 with room rates increased flight frequencies and new plans for this project was approved in International, to operate its 5-star hotel, (ARR) for both selected 4-star and 5-star expected to be competitive with that of routes are expected to help cushion the February 2014 and the earthworks are which will comprise 260 rooms and hotels saw increments of 1.5% and similar grade hotels in the Bukit Bintang decline in tourist arrivals from China. belt. expected to commence in the third 350 long-stay apartments. Kempinski, 3.6%, recording at RM220 (2H2013: quarter of this year once relevant building an international hotel chain founded RM216) and RM372 (2H2013: RM359) ASEAN countries will continue to be the Fairmont Hotel & Resorts, a luxury construction approval is obtained. Upon in Berlin, Germany, in 1897 is majority respectively. largest contributor of tourist arrivals. This brand in the FRHI Hotel & Resorts completion, the project is expected controlled by Thailand’s Crown Property year, Tourism Malaysia aims to achieve Source: Knight Frank Research / MIHR Aloft Kuala Lumpur Sentral, The (FRHI) portfolio has entered into an to register a gross development value Bureau. RM41 billion in revenue from some 20 Boulevard - St Giles Premier Hotel, agreement with Cititower Sdn Bhd, a (GDV) of approximately RM1.4 billion. million ASEAN tourists. Accor, the French hotel group which joint-venture (JV) between Qatari Diar The company is currently in negotiation Concorde Hotel, Federal Hotel, Novotel currently operates eight hotels with 2,520 The outlook for the hospitality sector Real Estate Investment Company and with an international hotel chain to brand and Piccolo were among the 4-star rooms in Malaysia under the Pullman, is expected to remain optimistic in the KLCC (Holdings) Sdn Bhd, to open and operate the hotel and serviced hotels recording an ARR above RM250 Novotel and Ibis Styles brands is rapidly medium to long term supported by a its first property in Malaysia. Fairmont residences. while 5-star hotels achieving ARR above Kuala Lumpur, which is set to debut in expanding its network nationwide. It has RM450 include The Ritz Carlton, Shangri- resilient tourism industry with high tourist 2017, will be located within the KLCC Meanwhile, Singapore-listed Oxley 15 new hotels in the pipeline which will La and Westin. arrivals and corresponding receipts. development. It will feature a 62-storey Holdings Ltd which paid benchmark provide circa 2,600 rooms by 2016. pricing for a 3.11-acre tract along Jalan luxury hotel offering 750 well-appointed Two hotel brands under Marriott Ampang (RM3,300 per sq ft) at the end guestrooms along with an executive International – Marriott and The of last year, is planning a RM3.5 billion lounge and Fairmont Gold, the luxury Autograph Collection are slated to mixed-use project dubbed Oxley Towers

12 13 REAL ESTATE HIGHLIGHTS RESEARCH

conventions & exhibitions (MICE) market thousand in 2012, indicating a growth of with the Banyan Tree Group’s five- rate of about 95%, up 1% from 2H2013. as well as for leisure; several hotels are 9.3% (statistics obtained from Penang star Angsana brand. Purchasers are Rental rates, range from RM2.80 per sq Outlook PENANG either under construction or planned on Global Tourism). Domestic arrivals also automatically enrolled into the coveted ft to RM3.50 per sq ft per month. Effects of the numerous cooling the island. Hotels scheduled for opening increased to 1.5 million in 2013 from 1.2 Sanctuary Club. measures put in place to arrest in 2014 include The Royale Bintang million in 2012. PROPERTY It should be noted that many of the newer speculation have begun to affect Penang at the Weld Quay waterfront Retail launches offer units that are fitted out the market. Generally, the volume (opened in March 2014), the RM300 MARKET with kitchen cabinets c / w hood, hob, The existing supply of purpose-built of transactions has dropped and is million The Rice Miller and Godowns also High End oven, light fittings, air-conditioning units shopping space on Penang Island expected to decline further over the next at Weld Quay; IGB Corp’s two hotels Condominium and quality sanitary fittings amongst the remains unchanged at the 2H2013’s level half year. (both 234 rooms) - The Wembley - St Sultan Abdul Halim Muadzam main items offered. of 6.69 million sq ft. Giles Premier Hotel and Cititel Express There are not many new launches of With the opening of Sultan Abdul Halim Shah Bridge (Second Penang nd Penang along Jalan Magazine and the high-end condominiums in 1H2014. Compared to 2H2013, there were even The older prime shopping malls on the Muadzam Shah (2 Penang Bridge) Bridge) officially opened on 1st island have maintained their average and the Penang State Government’s 208-room G Hotel Kelawei (G Hotel’s Andaman Edition 18 East at Seri Tanjung lesser secondary sale transactions in March 2014 occupancy rate of 96% since 1H2013. emphasis on the Seberang Perai extension). Pinang by E & O offers 8 layouts; 1 1H2014 for condominiums sized from 3,500 sq ft to 6,000 sq ft but prices were Occupancy at the newest prime mall, South growth corridor of Batu Kawan, Future openings from 2015 through to bedroom units sized from 877 sq ft to maintained. Units in the older completed Mall, currently averages numerous developments have been In 2013, foreign direct 2017 include a five-star 23-storey 339- 1,123 sq ft; 1+1 bedroom units at 1,180 projects within the prime areas of about 70% though commitment of proposed and confirmed here and this investments (FDI) flow in room hotel along Jalan Sultan Ahmad sq ft; 2 bedroom units sized from 2,036 Tanjung Bungah and Pulau Tikus were space is more than 80% secured. For has resulted in much excitement and Penang’s manufacturing sector Shah by Bintang Holdings, a 225-room sq ft to 2,057 sq ft and 3 bedroom units generally transacted at prices ranging secondary shopping malls, average interest being currently focused on this amounted to RM3.9 billion, up hotel in Tanjung Tokong by WHH Land, from 2,770 sq ft to 2,834 sq ft. Prices from RM480 per sq ft to RM650 per sq occupancy rates for 1H2014 generally area. from RM2.4 billion in 2012 218 Macalister which offers 200 hotel for the semi-furnished units start from ft whilst those in newer developments range from 65% to 94%. rooms in addition to serviced suites, RM1,500 per sq ft. Generally, the condominium market is command a higher range of RM600 per the RM25 million Victoria Street Hotel, Rental rates for ground floor retail lots expected to see further consolidation in The Penang State Government Angsana Teluk Bahang - all the 150 hotel sq ft to RM850 per sq ft. Smaller sized the RM33.8 million OZO Hotel and an in both categories of shopping malls terms of volume of sales. Demand for imposed a 3% levy on purchases suites offered for sale are designed as units at the newer developments in unnamed RM80 million boutique hotel generally stabilised at RM13 per sq ft to quality prime office space is set to grow of properties by foreigners, 2-bedroom units either on a single or Gurney Paragon and Seri Tanjung Pinang along Penang Road in George Town. RM38 per sq ft per month, depending on and this augurs well for the office market. effective 1st February 2014 dual key concept. The standard units have resold at prices of RM800 per sq ft Angsana Telok Bahang, a 272-unit hotel the mall, location and size of the units. The retail market, on the other hand, is are generally sized from 1,027 sq ft to to RM1,100 per sq ft. / hotel suite development where the hotel becoming more competitive resulting 1,169 sq ft whilst penthouse units with in more intense pressure on rentals in suites are sold on a leaseback basis to private gardens vary from of 2,360 sq ft Asking rentals for fully furnished units be operated and managed by the Banyan in newer developments range from the less popular malls. However, the to 3,050 sq ft in area. Prices start from performance of prime malls are not Market Indications Tree Group, is expected to open its doors RM1,930 per sq ft for the beach front RM9,000 to RM12,000 per month whilst in 2017. unfurnished units are asking RM7,000 to anticipated to be impacted negatively Both Kuala Lumpur and Penang-based block and from RM1,635 per sq ft for the RM8,500. In older condominiums, asking as they are still enjoying very good developers are planning to develop International arrivals directly into the landward block. All the units come with a rentals range from RM5,000 to RM8,500 occupancy and rental rates. RM4.56 billion worth of residential and Penang International Airport in 2013 full furniture and appliance package, with per month. commercial projects in Penang in 2014 numbered 671.2 thousand versus 614 quality finishes and fittings synonymous - RM1.86 billion on the mainland of Seberang Prai and RM2.7 billion on the Office TABLE 6 island Future Supply of Retail Space within Georgetown The supply of office space (buildings On the mainland in Batu Kawan, Aspen- of 10-storeys and above) on Penang Project Estimated Net Lettable Expected Ikano had purchased 245 acres of land Island in 1H2014 has been reduced to Area (sq ft) Completion for RM483.95 million to be developed 5.59 million sq ft following the sale of 10 by Ikano Pte Ltd into an integrated 500,000 Phase 3 - 2018 floors of office space together with 50 car Phases 3, 4 & 5 (1) Phases 4 & 5 - 2020 shopping mall that will be anchored by park bays in the 25-storey Menara Liang st (1) an Ikea store as its 1 phase together Court along Jalan Sultan Ahmad Shah. Planned with a mixed development of offices and There are plans to convert the space into Source: Knight Frank Research residences in the future. 55 units of SoHo suites with resort style Remark: Knight Frank Malaysia is the appointed retail development consultant for Penang Times Square The service industry, which the tourism residence. /hospitality sector plays a major role, Average occupancy rate of the two more is one of the two main economic prime office buildings in the city stands drivers for Penang, the other being the status quo at 2H2013’s level of 98% with manufacturing sector. The impending rentals remaining unchanged in the range completion of the Subterranean Penang of RM2.50 per sq ft to RM2.80 per sq ft International Convention and Exhibition per month. At the newer Gurney Paragon Centre (SPICE) in 2015 and the Penang Office Tower which opened last year, Waterfront Convention Centre (PWCC) in rental rates are higher at RM3.30 per sq ft 2017 will gear up demand for hotel rooms per month. in Penang. In anticipation of the increase in visitors for the meetings, incentives, Outside the city, Suntech and Menara Angsana Teluk Bahang IJM Land, have an average occupancy

14 15 REAL ESTATE HIGHLIGHTS RESEARCH

can sell the solar power to Tenaga Nasional Berhad to set up a post- and RM2.1 million while the cluster and Nasional to generate revenue. production facility at the Pinewood semi-detached homes having built-up JOHOR Iskandar Studios Malaysia. areas from 1,980 sq ft and 3,000 sq ft The special tax holidays and other onwards are priced from RM1.6 million incentive packages previously exclusive UEM Sunrise Berhad and Mulpha and RM2.88 million respectively. BAHRU to investments within Medini in Nusajaya, International Berhad formed a 59:41 JV have been extended to three other for the construction of three road projects Oleander cluster homes by IOI Properties PROPERTY nodes in Iskandar Malaysia, in Iskandar in the vicinity of Iskandar Malaysia valued Berhad located within the on-going Malaysia, namely Danga Bay (tourism), at RM107 million in May. The road works, Taman Kempas Utama in Kempas. The MARKET Pinewood Studios (creative projects) spanning a total 8.3 kilometres, will be development comprises 180 units of and Vantage Bay (healthcare) to completed in phases by December 2018. double-storey and 2.5-storey cluster accelerate and spearhead to accelerate The project is aimed at creating and houses with built-up areas between 2,628 Land transactions in Iskandar and spearhead Iskandar Malaysia into upgrading roads in Gelang Patah and sq ft and 3,111 sq ft, priced from RM1.06 Malaysia, especially in certain the next level as it aims to become an Gerbang Nusajaya to jointly serve the million to RM1.7 million. international metropolis by 2025. growing population there. preferred areas, have remained The Avira Garden Terraces, located at active Beginning May 1, Johor will implement Hotel Selesa and Menara Metropolis, Medini by Nuri Merdu Sdn Bhd, a JV the minimum threshold of foreign the city hotel and office block which company between Eastern & Oriental property ownership to RM1 million and have been long in operation in Johor Berhad, Khazanah Nasional Berhad and Despite a series of property R&F Tanjung Puteri this is applicable to housing projects Bahru city, changed their ownership in Singapore’s Temasek Holdings. The cooling measures, local and approved after that date. In another February 2014 to Smartwheels Group, a soft launch in May saw the 208 units of foreign investors are still showing measure, the Johor government has also Johor-based Bumiputera company for terraced houses receiving 70% booking keen interest. use project. A special purpose vehicle, parcels of leasehold land measuring barred locals from selling agricultural land a consideration of RM125 million. The over a weekend. The units with built-up Renown Dynmaics Sdn Bhd, was 14.16 acres at Tampoi. The estimated to foreigners. new owner will invest RM20 million to areas of about 2,200 sq ft are priced at formed to acquire the leasehold land GDV from the project which will comprise refurbish the hotel and another RM10 slightly below RM1.3 million each. On the industrial front, India’s for RM444.31 million. Tebrau Teguh will serviced apartments and affordable million to upgrade the office tower. biopharmaceutical company, Biocon Bandar Meridin East, a 1,352-acre Market Indications carry out reclamation work to resurface homes, is RM815 million. started its operation at the Bio-Xcell freehold township at Pasir Gudang by 60 acres of the land at an estimated cost As at end of April 2014, Iskandar In March 2014, China’s Country Garden biotech park at the end of January 2014. Mah Sing Group Berhad has also opened of RM190 million. Residential Malaysia has registered a cumulative together with Kumpulan Prasarana With an investment of over US$160 for registration. The self-contained investments of RM138.61 billion, with In early February 2014, Kuala Lumpur Rakyat Johor (KPRJ) revealed their plans million, the country’s largest foreign There were several launches in the first township will kick off with double- Singapore being the highest investor Berhad (KLK) and UEM Sunrise for a massive reclamation project to build investment in this sector, Biocon has half of 2014, comprising high-rise and storey terraced, linked semi-detached at about RM11 billion. 45% of the total Berhad teamed up to jointly develop luxury homes near Pendas / Tanjung been recognised as an Entry Point landed developments. Some of the and semi-detached houses (estimated investment has been realized. two projects in Iskandar Malaysia with Kupang, the second link crossing to Project (EPP) by the government. notable landed developments are as built-up areas of 1,500 sq ft, 1,800 sq ft, expected total gross development Singapore. According to sources, the follows. and 2,200 sq ft) at indicative pricing of Another China-based developer, Another major foreign investor, The value (GDV) of RM20 billion. The first project, dubbed Forest City, spanning RM300,000, RM400,000 and RM500,000 Guangzhou R&F Properties Co Ltd Hershey Co, which announced its RM816 Eco Spring and Eco Summer, a 613.8- development is on a 2500-acre land nearly 5,000 acres of part of the Straits of respectively while the shop offices has forayed into the Iskandar Malaysia million confectionery plant at Senai last acre mixed development with combined at Kulaijaya owned by KLK whilst the Johor, could be the largest reclamation (estimated built-up area 3,000 sq ft) will property market after acquiring six plots year, has commenced construction of its GDV of RM5.87 billion by Eco World second is a 500-acre land at Gerbang project in the country. be priced at circa RM500,000 each. of land totalling 116 acres in Johor Bahru facilities. This investment is expected to Development Sdn Bhd. Located in Nusajaya, owned by UEM Sunrise. Both city centre for RM4.5 billion (or circa Through the acquisition of a property generate up to 400 jobs in the next two the Tebrau Corridor, the freehold Compared to 2013, new property parties exchanged their lands at the price RM891 per sq ft) from the Sultan of Johor development company, Precious Quest years. development offers 864 units of 2-storey launches in 1H2014 have reduced in of RM871.2 million - KLK selling its land in December 2013. The first phase of the Sdn Bhd, Glomac has in March 2014 terraced, cluster and semi-detached volume and recorded a lower take- at Fraser Metropolis for RM8 per sq ft Petroliam Nasional Berhad (PETRONAS), development is expected to be launched obtained the rights to develop a piece houses. The terraced houses with up rate. However, property prices by while UEM Sunrise is unlocking the value has approved the final investment of in 3Q2014. of leasehold land at Kulaijaya measuring built-up areas from 1,875 sq ft to 2,700 developers are still on the hike, especially of its parcel at Gerbang Nusajaya for RM88.6 billion for the development of circa 174 acres. The deal was concluded sq ft are priced between RM1 million for landed homes. Guangzhou R&F’s record deal in the RM40 per sq ft via the incorporation of the Pengerang Integrated Complex at RM22.768 million or circa RM3 per sq ft. Iskandar region was swiftly surpassed two JV vehicles. (PIC) in April 2014. The project entails a within the same month, when Singapore- In April 2014, one of China’s biggest world scale Refinery and Petrochemical LBS Bina Group Berhad acquired two registered developer Hao Yuan state-owned companies, The Greenland Integrated Development (RAPID) and parcels of leasehold land totalling 4.32 Investment Pte Ltd paid RM1.6 billion for Group invested RM600 million to acquire associated facilities, spanning an area acres in Johor Bahru city centre from a 36.8-acre land at Danga Bay, analysed close to 14 acres of land at Danga Bay of about 6,240 acres of land. At the the Employees Provident Fund (EPF) in at RM998 per sq ft. It has formed a joint- area from IWH (or circa RM987 per sq ft). same time, the Phase 1A terminal in February 2014 for RM71.82 million (or venture (JV) company with the vendor, The high-profile developer is reportedly Pengerang by Dialog Group Berhad has circa RM382 per sq ft). Together with Iskandar Waterfront Holdings Berhad in talks with IWH and its associated commenced its operation. With 25 tanks its existing adjoining land bank of 1.18 (IWH), to develop the area. companies for more land acquisitions. and a total storage capacity of 432,000 acres, LBS plans to develop a mixed cubic metres, it will complement the PIC Also in December 2013, Tebrau Teguh residential and commercial project which The Iskandar Regional Development project. Berhad tied up with Golddust United Sdn will generate approximately RM20 million. Authority (IRDA) has put up a proposal Bhd, a wholly owned unit of Tropicana to the Prime Minister in December 2013 Imagica Corp, one of Japan’s leading In another move, LBS Bina inked a deal Corp Bhd, to jointly develop a partially to start a community-based solar power production and post-production with a unit of Yayasan Pelajaran Johor submerged site at Plentong measuring project in Iskandar Malaysia. Under the companies, has invested RM9 million (YPJ) in April 2014 to jointly develop four Southkey Mosaic 84.6 acres into an RM3.7 billion mixed- project, community-based organisations to form a JV company with Khazanah

16 17 REAL ESTATE HIGHLIGHTS RESEARCH

total GFA of 80,000 sq ft, is completed rentals ranging from RM15 per sq ft to Office in 2Q2014. Within April and May, it has RM40 per sq ft per month. TABLE 7 secured two tenants namely Huawei, Notable Land Transactions in Iskandar Malaysia As at 1Q2014, the total net lettable area Capital 21 @ Capital City, a themed retail (NLA) of purpose-built office space a leading global ICT provider, and development, is part of a JV initiative Transaction Purchaser Land Size Purchase Location which includes private buildings and Goldbury Communications Sdn Bhd, between developers, Hatten Group Sdn Date (acres) Price (RM) an IT automative consultant. Medini government buildings in Johor Bahru Bhd, Sunbuild Development Sdn Bhd and Iskandar Malaysia Sdn Bhd, the master stands at approximately 8.5 million sq ft contractor, Gadang Holdings Bhd. The Dec-2013 Guangzhou R&F 116.0 4.2 billion Johor Bahru City developer of Medini is also in the midst of with an overall average occupancy rate of first phase of the RM2.2 billon integrated Dec-2013 Hao Yuan 36.8 1.6 billion Danga Bay constructing Medini 7, an adjacent office about 73.1%. project named Capital City will provide building with a total GFA of 140,000 sq ft, Dec-2013 Renown Dynamics Sdn Bhd 60.0 444.3 million Plentong some 1 million sq ft of retail space to the Private buildings which currently slated for completion by April 2015. Feb-2014 LBS Bina Group Bhd 4.32 72 million Johor Bahru City accounts for approximately 70% (5.94 market when completed in 2018. Several integrated developments have Mar-2014 Glomac Bhd 174.2 22.8 million Kulaijaya million sq ft) of purpose-built office Southkey Megamall, a JV between Kota plans to incorporate purpose-built office Apr-2014 Greenland Group 14.0 600 million Danga Bay space in Johor Bharu have an average Southkey Sdn Bhd and IGB Corporation, buildings as one of their key components. occupancy of about 71.7%. Rentals for is expecting more than two million Source: Knight Frank Research They include Medini Empire, Zikay @ prime and non-prime CBD office space shoppers per month when its first phase Medini, D’Pristine @ Medini, Southkey, remained stable with asking rental rates opens for business in 2016 / 2017, with Vantage Bay and 18 @ Medini. for prime space ranging from RM2.50 per about 350 to 400 tenants. Outlook sq ft to RM3.30 per sq ft per month while TABLE 8 non-prime office space command rental Several upcoming integrated The review period saw the Notable High-Rise Residential Launches in Iskandar Malaysia rates between RM1.80 per sq ft and Retail developments with retail component implementation of a series of cooling include Zikay @ Medini, Medini Empire, measures which include the 2% levy on Development Location No. of Built-up Price RM2.50 per sq ft per month. These rates As at 1Q2014, the total NLA of retail D’Pristine @ Medini, Meridin @ Senibong, foreign buyers, abolishment of Developer Name Units Area (sq ft) (RM psf) are generally inclusive of the provision of space (includes shopping centres, 18 @ Medini, Vantage Bay, Sunway Interest Bearing Scheme (DIBS), the hike shared services comprising centralized arcades and stand-alone hypermarkets) Bora Residences Danga Bay 396 694 - 1,500 1,100 - 1,300 air conditioning, security and cleaning Medini, The Suasana and Iskandar in minimum threshold of foreign property in Johor Bahru stands at 11.16 million Almas Suite Puteri Harbour 546 520 - 2,221 750 - 945 Residences. ownership to RM1 million and the ban on services at the common areas. sq ft with average occupancy at 75.6%. foreigners buying agricultural land. Top Havona Mount Austin 1,148 953 - 2,312 From 483 Being the first purpose-built office in Prime retail space continued to perform that with a high incoming supply of high- Botanika Bayu Puteri 264 1,126 - 1,422 From 550 Medini, Medini 6 which comprises four well with occupancy rates recorded FIGURE 6 rise residential and retail space especially two-storey blocks and a cafeteria with a in excess of 80%, commanding gross Southkey Mosaic Kota Southkey 584 676 - 1,509 896 - 1,030 Retail Supply and Occupancy in hotspots like Nusajaya and Danga Bay, Crescent Bay Suites Bayu Puteri 408 779 - 1,242 From 734 Trend in Johor Bahru some developers have started shifting (2004 – 1Q2014) their focus to township developments or Tower F, Marina Cove Tebrau 252 526 - 1,344 700 - 900 FIGURE 5 business parks at the suburbs. The Signature Molek Regency Taman Molek 1,050 640 - 2,855 From 470 Office Supply and Occupancy Trend in Johor Bahru (2004 – 1Q2014) The iProperty.com Asia Property Market Marina Residences Bayu Puteri 200 1,200 - 1,500 From 600 Sentiment Report 2014 revealed that Green Haven Kota Puteri 1,134 698 - 1,598 From 720 purchasers in Malaysia are adopting a Source: Knight Frank Research cautious approach in property purchase and investment amid concerns on affordability and rising house prices. However, the same report also noted that some 51% of Singaporean respondents expressed strong interest to invest in Iskandar Malaysia, with landed property being their first choice. It is anticipated that the strong Singapore dollar will continue to drive Singaporeans to invest in the Iskandar region.

Going forward, despite the seemingly slowdown in housing demand in 1H2014, the property market is expected to Source: Knight Frank Research / NAPIC remain firm with more activities from Source: Knight Frank Research / NAPIC developers and property buyers alike Botanika anticipated in 2H2014. However, broadly compared to 2013, we anticipate 2014 to be a year of consolidation for the property market, with price correction on certain property sectors especially high- rise residential in particular location.

18 19 MALAYSIA CONTACTS Eric Y H Ooi Executive Chairman +603 228 99 668 [email protected]

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 Associate Director +603 228 99 672 [email protected]

RESEARCH & CONSULTANCY Judy Ong Mei-Chen Executive Director +603 228 99 663 [email protected]

INVESTMENTS / INDUSTRIAL AGENCY Allan Sim Song Len Executive Director +603 228 99 606 [email protected]

GLOBAL CORPORATE SERVICES Teh Young Khean Associate Director +603 228 99 619 [email protected]

RETAIL CONSULTANCY & LEASING Rebecca Phan Associate Director +603 228 99 618 [email protected]

RESIDENTIAL PROPERTY MANAGEMENT Vincent Tiong Associate Director +603 228 99 718 [email protected]

COMMERCIAL PROPERTY / FACILITIES MANAGEMENT Matthias Loui Executive Director +603 228 99 683 [email protected]

Natallie Leong Knight Frank Research provides strategic advice, consultancy services and forecasting to a wide Executive Director +603 228 99 638 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 and projections according to changes in market conditions. +603 228 99 612 [email protected]

RESIDENTIAL PROJECT MARKETING Herbert Leong RECENT MARKET-LEADING RESEARCH PUBLICATIONS Associate Director +603 228 99 629 [email protected]

PENANG BRANCH Tay Tam Executive Director +604 229 3296 [email protected]

JOHOR BRANCH Ricky Lee Executive Director +607 3382 888 [email protected]

SABAH BRANCH Ginn Lai Associate Director +608 8448 649 The Wealth Report Asia Pacific Prime Prime Asia Global House Price [email protected] 2014 Office Rental Index Development Land Index Q1 2014 Q1 2014 Price Index March 2014 Stephenie Wong Resident Branch Manager Knight Frank Research Reports are also available at www.knighfrank.com +608 8448 649 [email protected]

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