RESEARCH

REAL ESTATE HIGHLIGHTS 2nd HALF 2015

bahru HIGHLIGHTS KUALA LUMPUR HIGH END CONDOMINIUM MARKET Sluggish market with potential buyers and investors adopting ECONOMIC INDICATORS Kiara; DC Residency in Damansara ‘wait and see’ approach. Heights; and Damai 88, A Residency Amid domestic and external headwinds, D’Suria, 9 Madge and Brunsfield the Malaysian economy continued to Transaction volume in the Residences @ U-Thant in the Ampang moderate, recording a growth of 4.7% in Hilir / U-Thant area. condominium / apartment the third quarter of 2015 (2Q2015: 4.9%), segment continue to decline. driven mainly by private sector demand. Another seven projects, scheduled for For the whole year of 2015, the country’s completion by the first half of 2016, will contribute some 1,998 units to the Prices to remain flat generally economy is expected to expand by 4.5% existing stock. The bulk of this future with rentals expected to to 5.5% (2014: 6.0%). supply are located in KL City (1,591 move south amid heightened Private consumption which grew by 8.8% units), followed by the localities of KL competition between existing in 1Q2015 (4Q2014: 7.6%) decelerated Sentral and Mont’ Kiara with 160 units supply and new completions. to 6.4% in 2Q2015. Going forward, and 118 units respectively. The projects it is expected to moderate further as include Pavilion Banyan Tree Signatures, Greater level of product households continue to be concerned Le Nouvel, Vortex Suites, The Ritz- over the state of the economy amid innovation and marketing Carlton Residences Kuala Lumpur, KL uncertainties arising from implementation strategies amid a challenging Trillion, The Residences at The St. Regis of the Goods & Services Tax (GST), market with more projects Kuala Lumpur and One Kiara (Tower A). further weakening of the local currency offering leaseback arrangements and softer labour market conditions. The impending completions of Pavilion and pool management Meanwhile, private investment which Banyan Tree Signatures, The Ritz- programmes. expanded by 11.7% in 1Q2015 (4Q2014: Carlton Residences Kuala Lumpur and 11.1%) contracted sharply to 3.9% The Residences at The St. Regis Kuala in 2Q2015 as business sentiment Lumpur, leveraging off the quality of weakened. international-class hotel brands, mark the new era of luxury living in Kuala Lumpur. Headline inflation averaged at 2.9% in June and July (2Q2015: 2.2%) Despite the sluggish high end residential reflecting the effects of higher domestic market, several notable projects were fuel prices and the impact of the GST. previewed and launched during this half Moving forward, it is expected to peak year. in early 2016 before moderating for the The latest debut of branded residences remainder of the year. Unemployment is YOO8 by Kempinski, forming part of rate increased marginally to 3.2% in July the RM5.4 billion 8 Conlay integrated from 3.1% in the preceding month. mixed use project that also comprises During the review period, the Overnight retail and hotel components. Tower A, Policy Rate (OPR) remained unchanged featuring 564 units sized from 700 sq ft to at 3.25%. 1,300 sq ft, was launched on November 18. Despite its new benchmark pricing, SUPPLY & DEMAND averaging at RM3,200 per sq ft, it has reportedly achieved 70% booking. Tower The cumulative supply of high-end B with 468 units is slated for launch by condominiums in Kuala Lumpur stands 1H2016. at 42,749 units following the completion of 3,139 units in the second half of 2015. Designed by Pritzker prize winner, Jean In terms of distribution, Mont’ Kiara / Sri Nouvel, the 195-unit Le Nouvel KLCC Hartamas contribute about 48.0% (1,508 by Wing Tai is a Build-Then-Sell units), followed by KL City with 35.5% project. The indicative pricing for the (1,113 units). The remaining units are luxury apartments with typical sizing located in Ampang Hilir / U-Thant area of 1,810 sq ft to 2,832 sq ft is from (518 units or 16.5%). RM2,200 per sq ft onwards. The project is expected to be launched next year. Notable completions include Face Platinum Suites (Phase 1), Mirage On October 1, UDA Land Development Residence and Crest Sultan Ismail in Sdn Bhd unveiled its latest project known KL City; Concerto and Verdana in North as Anggun Residences. Located within

2 real estate highlights

walking distance from the Tuanku with guaranteed rental returns to boost Residences, were transacted in excess of monorail station, Anggun Residences sales while in the secondary market RM1,700 per sq ft in 1H2015. Meanwhile, offer 384 units of serviced apartments (sales and lettings); there are ample prices of larger units in The Troika, atop a 3-storey retail podium, priced from choices and opportunities for buyers and Quadro and One KL, sized above 2,200 RM1,300 per sq ft. tenants looking for good buys / ‘bargain’. sq ft, ranged from about RM1,100 to RM1,300 per sq ft. Bina Puri Holdings Bhd, the developer for In 3Q2015, Kuala Lumpur recorded the Opus Residences, has announced 1,694 transactions in the condominium In the primary market, prices of luxury that all the units for Opus Tower 2 will be / apartment segment, 6.3% less than branded serviced residences range from equipped with Calvin Klein furniture and the preceding quarter (2Q2015: 1,808 RM2,000 to RM3,000 per sq ft. Gorenje kitchen appliances. The units, transactions). The existing stringent Brunsfield Residence @ U-Thant, a sized from 700 sq ft to 1,100 sq ft, are lending guidelines continue to impact recently completed low rise condominium priced from RM1,500 to RM1,600 per sq ft. sales. development, is retained by the In the locality of Ampang Hilir / U-Thant, During the review period, asking prices developer for investment purpose. The KSL Group’s latest project known as 18 and rentals in most locations were project offers 93 partially furnished units Madge is designed by Veritas Architects. generally flat. spread across six blocks with typical The luxury low-density condominium built-up areas sized from 3,357 sq ft to development features 48 units with In KL City, high-end condominiums with 4,444 sq ft. Asking rentals start from typical sizing from 2,234 sq ft to 4,207 small to mid-unit sizing ranging from RM15,000 per month. Knight Frank sq ft and two penthouses sized at 13,913 about 600 sq ft to 1,300 sq ft in selected Malaysia is the Sole Leasing Agents for sq ft and 14,803 sq ft. Selling price starts schemes such as ViPod Residences, the project. from RM2.7 million. Marc Serviced Residence and Pavilion

Agile Mont’ Kiara, designed by renowned Singaporean architectural firm, DP Architects, opened its 44-storey Tower H for sale in October. The 171 partially furnished units are priced from RM900 to RM950 per sq ft on average. To date, the tower has reportedly achieved circa 50% booking.

Upcoming notable projects with residential components include 8 Kia

Peng by I-Bhd; Stonor 3 - a joint- Brunsfield Residence - The latest landmark at U-Thant venture (JV) project between Tan & Tan Developments Berhad and Mitsubishi

Jisho Residence; Casa Kiara 3 in Mont’ TABLE 1 Kiara (288 units with GDV of RM336 Completion of High End Condominiums in 2H2015 million) by Sunway Property; Phase 1 of The Belfield by Tradewinds Corporation (high-rise residences centred on a premium retail avenue); a residential block within the on-going KL Gateway development by Suez Capital; the City Centre (BBCC) – a JV project between Eco World Development Group Bhd, UDA Holdings Bhd and the EPF; and Phase 1 of Pavilion by Impian Ekspresi of Pavilion Group and the Canada Pension Plan Investment Board (CPPIB). Prices and Rentals

With market sentiment remaining weak, potential buyers and investors continue to adopt a ‘wait and see’ approach. In the primary market, developers are * Pending Certificate of Completion and Compliance (CCC) offering attractive home ownership packages and creative financial deals Source: Knight Frank Research

3 Outlook fringe locations. Kuala Lumpur also continues to witness the entry of more branded residences as The competitive high end condominium Market sentiment for the high end it moves towards becoming a world- market is also driving developers to condominium segment remains class city by 2020, supported by major greater level of product innovation and cautious going forward, as it continues investments in its public transportation marketing strategies. to be impacted by the various cooling system. measures, softening demand and a There has been an increased trend of The on-going and upcoming slowdown in the economy. Some of projects offering leaseback arrangements infrastructure works that include the the projects scheduled for launch by and pool management programmes Light Rail Transit (LRT) extension lines 1H2016 may be deferred. with guaranteed rental returns (GRR) to and Mass Rail Transit (MRT) lines boost sales and attract potential buyers The impending completions of new will promote more transit oriented and investors looking for long term projects amid a weak market is developments (TOD) along the investment in terms of rental returns and expected to heighten competition in the transportation routes. rental market, both in KL City and its potential capital appreciation.

TABLE 2 Average Asking Prices and Rentals of Existing High End Condominiums

* Excludes Desa U-Thant and Seri Hening *** Includes Twins @ Damansara Heights ** Excludes Binjai on the Park but includes Pavilion Residences **** Excludes Verve Suites which comprise mainly fully furnished small units

Source: Knight Frank Research

FIGURE 1 Projection of Cumulative Supply for High End Condominiums 2009 – 2016(f)

Source: Knight Frank Research

4 real estate highlights malaysia

HIGHLIGHTS KUALA lUMPUR & Beyond Kuala lumpur () Growing pressures on both rental and occupancy levels OFFICE Markets due to a high supply pipeline of existing and new stock amid a Market INDICATIONS weaker leasing market with lesser enquiries. The office markets in Kuala Lumpur and Beyond Kuala Lumpur (Selangor) remained subdued in 2H2015 as domestic More aggressive marketing plans and external headwinds continue to weigh with attractive tenancy terms to on the country’s economic outlook. retain and attract tenants in a highly competitive market. The depreciation of the local currency and volatility in commodity prices coupled with economic and political uncertainties Despite a general slowdown, do not bode well for the office market the investment market recorded which traditionally have been driven by several notable deals as savvy the services sector and oil & gas (O&G) investors / funds seek quality businesses. assets for long-term returns. There is growing pressures on both rental and occupancy levels. Rental and occupancy levels of Ismail and , the Grade well-located good grade dual Supply & Demand A Menara Bangkok Bank forms part compliant office space expected of the Berjaya Central Park integrated As of 2H2015, the cumulative supply development which also houses The to remain resilient in the short of purpose built office space in KL and Ritz-Carlton Residences, Kuala Lumpur. term. Beyond KL (Selangor) stood at circa 92.5 The stratified corporate office tower with million sq ft. BCA Green Mark Gold certification offers There were six completions during the a total of 171 suites in flexible sizes. review period, adding some 3.26 million Bangkok Bank will occupy eight levels sq ft of space to the existing stock. of corporate suites totalling 99,950 sq ft while the ground and mezzanine floors In KL, the cumulative supply increased to will house its banking halls. 51.0 million sq ft following the completion of ILHAM Tower (394,000 sq ft NLA), KL Trillion Office Tower is also part of Menara Bangkok Bank (475,000 sq a mixed use development. Located ft NLA) and KL Trillion Office Tower along Jalan Tun Razak, the GBI certified (305,000 sq ft NLA). 34-storey Grade A office tower features 216 suites. Meanwhile, in KL Fringe, the completion of Q Sentral (1,004,000 sq ft NLA), The Q Sentral on Lot B is integrated with the Vertical I & II (830,000 sq ft NLA) and transportation hub of KL Sentral. The GBI Menara Guocoland (247,000 sq ft NLA) at Gold certified 45-storey office building Damansara City, brought the cumulative offers stratified office space in two supply to 23.8 million sq ft. distinct zones, with the large floor plates on the higher levels catering to corporate With no completion of office buildings requirements. Beyond KL (Selangor), the cumulative office supply remained at circa 17.7 In the decentralised office location of million sq ft. South, the new completion by UOA Group comprises two 37-storey ILHAM Tower, a 60-storey world- office towers known as The Vertical I & II. class designed by Foster + The towers are linked to various venues Partners, is the new iconic landmark in of amenities that include a modern KL City. The GBI certified tower features healthcare centre, a RM100 million premium corporate offices (29 levels) at clubhouse and a 6-acre park. the lower zone and serviced apartments Meanwhile, the locality of Damansara at higher floors (14 levels). Heights which is undergoing rejuvenation Located at the intersection of Jalan Sultan saw the completion of Menara

5 Guocoland – the 19-storey Office Tower blocks of 37-storey office suites atop an Menara Naza TTDI in Section 13, Shah B of Damansara City, an integrated eight-storey retail podium and a three- Alam. The 20-storey office tower with development that also features two luxury storey basement car park. PHB has 306,000 sq ft GFA comes with 250 car condominium blocks (DC Residency), reportedly submitted its planning proposal park bays and facilities that include a Office Tower A (Menara Hong Leong), a to Dewan Bandaraya Kuala Lumpur gymnasium, swimming pool and café. lifestyle mall (Damansara City Mall) and an (DBKL) for approval in August 2015. Selangor Development Corporation international-class hotel (The Sofitel Kuala IJM Corp Bhd’s unit IJM Construction (PKNS) is spending approximately RM170 Lumpur Damansara). Sdn Bhd will undertake construction million on its new headquarters in Shah Office buildings slated for completion by (Stage Two) of the proposed mixed Alam. Laman PKNS, as the building is 1H2016 include Public Mutual Tower in commercial development on the former named, sits on a 1.6-hectare plot of land KL City; Menara Ken @ TTDI and Menara site of Hotel Equatorial Kuala Lumpur in in Section 14. The building which is GBI Hong Leong (Office Tower A – Damansara Jalan Sultan Ismail for RM455.5 million. rated and certified (Platinum) is due to be City) in KL Fringe and, Tower 2 of Mercu The work package for the new 52-storey completed by year end. Mustapha Kamal at Neo Damansara and block to be known as Equatorial Plaza Khind Holdings Bhd, an electrical home Iconic Tower – Block N at Empire City in involves construction works for the appliance maker, is planning a mixed- Beyond KL (Selangor). podium block, office tower and hotel use project on a 65,340 sq ft land parcel tower and the interior design works for Collectively, the above impending in , as part of its the hotel tower and hotel outlet. completions will contribute an additional diversification exercise. With an estimated 1.9 million sq ft of space to the existing Econpile Holdings Bhd has bagged a GDV of RM150 million, the project will office stock. contract valued at RM120.5 million for feature an office building (to be partly piling and related works for the Menara During this half, the average occupancy occupied by Khind), a retail component rate in KL City decreased marginally Felcra mixed development project on and serviced apartments. Construction to record at 82.5% (1H2015: 84.8%) Jalan Sultan Yahya Petra (formerly Jalan is targeted to commence by 1Q2016, following the completions of Naza Tower ), Kuala Lumpur. The integrated pending approvals from the relevant and ILHAM Tower which have yet to development which will house Felcra’s authorities. new headquarters (35-storey office tower) achieve significant occupancy levels. The first ever office tower to be developed will also comprise a 43-storey residential in , Shah Alam, was In KL Fringe, however, the overall tower (480 units of serviced apartments) recently unveiled. Block A of Radia occupancy rate inched up marginally and a six-storey commercial and retail Offices, is the result of a 50:50 JV to record at 89.3% (1H2015: 87.9%) block. following improved occupancies in between between Sime Darby Property several office buildings that include Mercu Mustapha Kamal, located in Bhd and UEM Sunrise Bhd. Part of the Menara LGB and 1 Sentrum. , comprises a Radia integrated development, which 27-storey Tower 1 and a 14-storey Tower has a GDV of RM1.6 billion, Block A The overall occupancy rate in Beyond 2 with net floor areas (NFA) of 285,091 sq comprises 159 units of stratified offices KL (Selangor) remained flattish at 77.3% ft and 213,719 sq ft respectively. Tower with flexible built-up areas ranging from (1H2015: 76.0%). 2, with 183,000 sq ft NLA, is available 825 sq ft to 2,001 sq ft. The units are There were several notable office related for lease and en bloc sale. It is slated for priced at RM770 per sq ft on average. announcements in 2H2015. completion by December 2015. Tower 1 The office block is expected to be ready which is completing by October 2016 will by 2018. On August 10, Affin Bank Berhad also be available for lease. The developer, Malaysian Resources Corp Bhd (MRCB), announced its strategic plan to develop Emkay, has plans for three more office which is jointly developing the first parcel its very own Head Office building with projects in the localities of Damansara of land in the Kwasa Damansara project in the purchase of a plot of land measuring Perdana, and KL City. 54,266 sq ft in the upcoming financial , has signed a management district of (TRX) IOI Properties Group Bhd is introducing contract for the development of Kwasa for RM255 million (or RM4,699 per sq IOI City Towers, a Grade A office Utama. The 29.82-acre commercial ft for plot ratio of 15.2). The proposed development comprising two 31-storey development will comprise eight office 35-storey international class Grade A towers within the RM20 billion township towers, a hotel, an auditorium and a building will have a GFA of 823,439 sq ft of IOI Resort City. The GBI certified common facility block. and 830 car park bays. offices offering a total of one million sq ft NLA are expected to be completed by Prices and Rentals Pelaburan Hartanah Bhd (PHB) plans end-2015. The towers will be connected to redevelop the former premises of During the review period, the average to the new Le-Meridien Hotel the Kuala Lumpur Regional Centre for achieved rental rates in both KL City and and IOI City Mall, overlooking the Palm KL Fringe remained flat at RM6.17 per sq Arbitration (KLRCA) located opposite Garden Golf Course. ft and RM5.70 per sq ft respectively. Kompleks Kraftangan at Jalan Conlay. The proposed development of the Naza TTDI Sdn Bhd continues to Kuala Lumpur Grade A offices continue 6.8-acre site will comprise a 50-storey strengthen its business presence with the to command higher asking rents, ranging serviced apartment building and two recent opening of its new headquarters, between RM7.00 and RM12.50 per sq ft

6 real estate highlights malaysia

per month despite further completions sq ft NLA) located within the on-going The contraction of the O&G sector, and weaker business sentiment. integrated development project known the main lifeline of the office segment as Damansara City Kuala Lumpur. The following the plunge in crude oil prices, Meanwhile, the average achieved rental appraised value of Office Tower A is has negatively impacted the market. rate Beyond KL (Selangor) remained RM1,150 per sq ft over its aggregate NLA. stable at RM4.19 per sq ft. In the coming quarters, with a high Malaysian Resources Corp Bhd (MRCB level of existing and impending Notable occupier movements during the has proposed to sell Menara Shell, its supply coupled with a weaker leasing review period include the following: 33-storey green office tower in Jalan market (lesser inquiries) which is seeing UK firm, Needle Partners, has opened a Tun Sambathan, Kuala Lumpur, to more consolidation cum mergers & new marketing office in the city that aims MRCB-Quill REIT (MQ REIT) for RM640 acquisitions (M&A) activities, competition to promote its English law and white label million (analysed to RM1,150 per sq ft among building owners are expected to service called Needle Network. on 556,468 sq ft NLA). Its wholly-owned heighten. subsidiary, 348 Sentral Sdn Bhd, has CTBC Bank Co Ltd, the banking entered into a heads of agreement with Developers and landlords of existing / subsidiary of CTBC Financial Holding Co, the trustee for MQ REIT. The agreement newly completed / under construction will be the first Taiwanese bank to set is for the disposal of the office tower office buildings will require more up an operational base in Malaysia in 17 together with a five-storey podium and aggressive marketing plans to maintain years. The lender expects the office to 4-storey basement car park. and improve their occupancy levels. start operations in the second half of this Tenants continue to be spoilt for choice year (Menara Hap Seng 2). Marble and granite products trader with attractive rentals, incentives and Stone Master Corp Bhd has entered into PA Group, a US-based international tenancy terms. a heads of agreement (HoA) to acquire insurance group, will set up its regional YNL Properties Sdn Bhd, the owner of a Overall, rental rates may dip over a period office in Kuala Lumpur having received piece of land measuring about 3,290 sq of time due to heightened competition in regulatory approval from the Labuan ft with an 11½-storey office building on a tenant favoured environment. Coupled Financial Services Authority. It will it in Jalan Raja Chulan, for RM15 million. with a further slowdown in the country’s offer similar investment products that The primary objective of the proposed economy, with business confidence at are available in Latin America, Eastern acquisition is to house its existing a low, many businesses are freezing Europe and the Middle East. corporate and head offices. recruitment, reducing investment on staff FBS Markets Inc., a Belize-registered and consolidating their positions – this Forex broker which focuses on clients in OUTLOOK will inevitably impact take-up rate and Asia has announced the opening of its overall occupancy levels. Going forward, the Kuala Lumpur and 12th international representative office in Beyond Kuala Lumpur (Selangor) office Nonetheless, rental rates of well-located . markets are expected to face further good grade, dual-compliant office space Procurri Corporation Pte Ltd, the downward pressures. are expected to remain resilient. global independent distributor of data centre equipment and multi-vendor TABLE 3 maintenance provider has relocated to a new office. The new 12,000 sq ft Office Investment Sales 2H2015 office in Infinite Centre, Petaling Jaya Building Name Location Approx. Lettable ConsiderationConsideration will accommodate its growth and future Area (sq ft) (RM)(RM / (RMpsf) psf) expansion plans. Menara Hong Leong (Office Tower A), Damansara Other notable office-related investment Damansara City Kuala Lumpur 1 Heights 506,069 1,150 announcements during the review period 2 include the following: Menara Shell Jalan Tun Sambanthan, 556,468 1,150 Hong Leong Bank Berhad (HLB) has Kuala Lumpur entered into a conditional share sale AmBank Group Jalan agreement with Hong Leong Real Estate Leadership Centre 3 P.Ramlee 57,801 623 Holdings Sdn Bhd (a wholly-owned unit of Guocoland (Malaysia) Bhd) for 1 Menara Hong Leong (Office Tower A) is a 33-storey purpose-built stratified office building (71% completed the proposed acquisition of the entire as at May 2015) within the on-going integrated commercial development of Damansara City Kuala Lumpur. issued and paid-up share capital of DC The indicative cash consideration for the entire issued and paid-up share capital of DC Tower Sdn Bhd is Tower Sdn Bhd (DCT) for an indicative RM189,333,000. The appraised value of Office Tower A is RM1,150 per sq ft. 2 Malaysian Resources Corp Bhd (MRCB) has proposed to sell Menara Shell together with a 5 storey podium cash consideration of RM189,333,000. and a 4 storey basement car park in the locality of Kuala Lumpur Sentral to MRCB-Quill REIT (MQ REIT) for DCT is principally a property investment RM640 million. company, holding the development 3 AmFIRST Real Estate Investment Trust (REIT) is disposing of a 13-storey office building known as AmBank and ownership rights in respect of a Group Leadership Centre at Jalan P. Ramlee for RM36 million. The freehold building comprises a 10-storey office block, a penthouse and a 3-level car park. 33-storey purpose-built stratified office building (Office Tower A with 506,069 Source: Knight Frank Research

7 TABLE 4 Selected Grade A Office Asking Rentals

Source: Knight Frank Research

FIGURE 2 Kuala Lumpur – Occupancy and Rental Trends

Source: Knight Frank Research

8 real estate highlights malaysia

HIGHLIGHTS VALLEY RETAIL MARKET

The weak local currency and Market INDICATIONS recent toll hike are expected Lifestyle Mall in Selangor. to further dampen consumer The MIER Consumer Sentiment Index On November 19, Ikea Malaysia opened sentiment over the next six (CSI) fell for the fifth consecutive its second store at Jalan Cochrane in the months as disposable income fall. quarters to an all time low of 70.2 points city fringe. Spanning circa 452,000 sq ft, in 3Q2015 with consumers adversely the larger Ikea Cheras outlet with 1,700 impacted by weaker finances due to Majority of retailers are adopting car park bays features 56 showrooms and the GST, depreciation of the ringgit and a ‘wait and see’ approach and has a seating capacity for 780 people at recent toll hike amongst others. caution in their expansion plans its restaurant. amid poor sales performance and In the second quarter of 2015, retail sales Ikea Cheras forms part of the MyTown reduced profitability. contracted 11.9% relative to a 5.3% expansion in the corresponding period integrated development by Boustead of 2014, the worst quarterly result since Holdings Bhd and Ikano Pte Ltd. The A handful of regional and local the 1998 Asian financial crisis (source: outlet will have seamless connection to retailers operating several brands Malaysia Retailer Association [MRA] and the 1.1 million sq ft MyTown shopping are taking up larger lots at Retail Group Malaysia [RGM]). centre which is slated for completion by competitive tenancy terms with end-2016. The Ikea store will also enjoy a attractive rentals and incentives Retail sales, however, rebounded in direct link to the underground Cochrance to improve space and cost 3Q2015 by posting a 1.6% gain. For the MRT Station which is expected to first nine months of 2015, retail sales efficiencies. complete by 2017. grew by a modest 1.0% when compared to the corresponding period in 2014. Spanning across circa 375,000 sq ft Despite a high impending supply retail space, Evolve Concept Mall began Amid a slowdown in the economy and of circa 4.61 million sq ft by operation in mid-November 2015. weaker job market, consumers are 1H2016, rental and occupancy The is part of a mixed bracing for tougher times ahead and this levels at prime and established development dubbed Pacific Place @ has impacted their spending patterns. regional and neighbourhood . It is situated adjacent to shopping malls are expected to Supply & Demand the Ara Damansara LRT Station which is remain resilient. expected to be operational by mid-2016. Three shopping malls opened during the The 5-level mall is anchored by Jaya review period, contributing a combined NLA of about 1.10 million sq ft, which Grocer, Logo Fashion & Gallery and H&M. brings the cumulative supply of retail Other key tenants include FOS, Samsung, space in the to circa 51.3 Celebrity Fitness Centre, Texas Chicken, million sq ft. The new completions are Little Fat Duck, The Tarik Place, Guardian IKEA Cheras in Kuala Lumpur, as well as Pharmacy, Pet Lovers Centre and Evolve Concept Mall and Star Avenue myNews.com.

Ikea Cheras

9 its proposed components. environment. Slated for completion by end-2018, the shopping mall will also On September 25, -based accommodate a fitness centre, grocer, Debao Property Development Ltd and entertainment centre with a family- announced that its subsidiary Debao friendly karaoke lounge. Property Development (HK) Ltd had completed its acquisition of Malaysia Mass Rapid Transit Corporation Sdn Bhd developer Elite Starhill Sdn Bhd. At the (MRT Corp) is reportedly in the process time of the announcement, Elite Starhill of acquiring land sited on by the existing was in process of purchasing a plot of Shopping Centre for the land measuring 90,008 sq ft located near purpose of constructing the Ampang Park and Tun Razak Mass Rapid Transit (MRT) Station. Under Exchange (TRX). The Development Order the planned Sungai Buloh-Serdang- for the land is reportedly for a 69-storey Putrajaya (SSP) MRT line, the Ampang commercial building comprising 956 units Park Shopping Centre may be affected of serviced apartments atop five retail due to a proposed underground station floors. in the area. MRT Corp has offered the strata-titled shop owners of Ampang Located along Jalan , EkoRiver Park Shopping Centre to sign a Mutual Evolve Concept Mall Centre forms part of the Kuala Lumpur Agreement by January 2016, in order to River City (KLRC) urban rejuvenation possess the land by April 2016 for the Developed by Mah Sing Group, Star project. The latter aims to transform the construction of the station. Avenue is an integrated development city’s northern river corridor into a vibrant project located along Jalan Sungai Buloh. waterfront. Scheduled for completion by Festival City Mall which was sold to It consists of Star Avenue Lifestyle Mall 2018, the EkoRiver Centre will have circa Singapore-based AsiaMalls Sdn Bhd and 3-storey shop office blocks. Opened 400,000 sq ft of NLA spread over six in August 2014 was renamed in December 2015, Star Avenue Lifestyle levels, and one floor of convention space Central in October this year. Notable new Mall is a four-storey shopping mall with with over 100,000 sq ft on its highest level. tenants at the mall with boasts 25,000 sq circa 277,000 sq ft of retail space. It The integrated project with a total of 3,000 ft of additional space include H&M, Auntie features a covered boulevard catering car park bays will also house a 68-storey Anne’s, Texas Chicken and Sangkaya. to weekend bazaars, festivities, gourmet tower that will house corporate offices and , Econsave and MBO Cinema restaurants, al fresco cafes and other fun hotel component. remain as the anchor tenants of . & vibrant outlets. The shopping mall has In August, the Canada Pension Plan secured Giant Supermarket as its anchor Investment Board (CPPIB) and Pavilion In Section SS15 , First tenant. Group formed a a JV (49:51) to develop Subang Mall is undergoing a major During the review period, there were Pavilion Damansara Heights. The mixed- refurbishment with re-opening targeted several retail developments announced / use development project on a 15.84- for 1H2016. Located adjacent to the unveiled in Klang Valley. acre site in Pusat Bandar Damansara upcoming Subang Jaya SS15 LRT station, will comprise 13 blocks of offices, four First Subang is expected to compete with KLCC Holdings Sdn Bhd and its partner, blocks of serviced apartments, a hotel two other notable shopping centres in the Qatari Diar Real Estate Investment and a 5-storey retail podium with circa nearby locality of SS16, namely Empire Company, are currently developing 1 million sq ft NLA. The project will Subang Gallery and . Cititower. The integrated project located enjoy connectivity to the Pusat Bandar within the KLCC development will enjoy During the review period, numerous F&B Damansara and Semantan mass rapid seamless connection to Suria KLCC and outlets made their debut at Mid Valley transit (MRT) stations in the locality. will comprise a 9-storey retail podium, a Megamall. They include Mikey’s New York Pavilion Damansara Heights is targeted for 59-storey hotel and an 80-storey office Pizza, Mini Mini, Red Lobster, Ra-men completion by 2021. tower. Potential hospitality brands include Bankara, Jipangi, Sankaya and Sushi Fairmont, Raffles or Swissotel of the FRHI In Selangor, Mitraland Group Sdn Bhd is Jiro. Other new outlets include Solar Hotels & Resorts group. developing a 15-acre mixed-development Time, Sports Direct, Jo’ Malone London, known as Gravit8 in the southern area of Lim Kok Wing Fashion Club and Avalon The 8 Conlay mixed use project by KSK Klang. The main attraction of the mixed Saree’s. Land Sdn Bhd will also feature a 4-storey development will be a maritime-themed retail component with circa 180,000 sq Australian-based retailer, Harvey Norman, concept shopping mall to be known as ft space, a luxury Kempinski hotel, a continues to expand by opening new Pier 8, featuring a massive aquarium at 5-storey car park and a banquet hall. It is outlets at Nu Sentral Mall and IOI City Mall. its centre of the shopping mall. In line expected to complete by 2020. with the maritime theme, the two-storey Meanwhile, Uniqlo expanded its presence The redevelopment of the Kuala Lumpur shopping mall will allocate circa 80% of its in Klang Valley by opening an outlet at The Regional Centre of Arbitration (KLRCA) space for F&B, offering visitors/shoppers Curve in , whilst BMS site by Pelaburan Hartanah Bhd (PHB) will good quality seafood in a contemporary- Organics opened new stores at Cheras feature an 8-storey retail podium amongst designed nice dining ambience Leisure Mall and . In

10 real estate highlights malaysia

October, US-based cosmetics retailer occupancy rates of prime and Management inked a deal with The Urban Decay opened its first flagship established shopping centres in the Intermark Sdn Bhd to acquire Intermark store in Malaysia at Suria KLCC. Klang Valley continued to remain stable Mall at a purchase consideration of (> 90%) and these include Suria KLCC RM160 million. Located along Jalan In Citta Mall at Ara Damansara, US- and in KL City; Tun Razak, the six-storey shopping based furniture retailer, Ashley Furniture Mid Valley Megamall and The Gardens mall with 225,014 sq ft NLA and five car Industries Inc, made its debut by opening Mall in KL Fringe; and , park levels with 367 bays, is part of an an 8,600 sq ft outlet. Its first store in the 1Utama Shopping Centre, Empire office-retail-hotel mixed development country offers an exclusive one-stop Shopping Gallery, Subang Parade and dubbed The Intermark. The purchase furniture sourcing platform. The Mines in Selangor. consideration which is analysed to circa Despite facing challenges, local retailers RM711 per sq ft on NLA basis comes and franchisers such as Parkson, PRICES AND RENTALS with a rental guarantee of RM15 million. Tony Roma’s Malaysia and Texchem Overall, prime shopping centres listed Earlier on September 17, Pavilion REIT Resources Bhd continue to expand under the property portfolios of KLCC Management Sdn Bhd, manager of existing brands and introduce new Stapled REIT, IGB REIT, Sunway REIT Pavilion REIT, entered into a conditional offerings. and CapitaLand Malaysia Mall Trust sale and purchase agreement with In November, Parkson Retail Asia Ltd and (CMMT) continued to record higher rates Equine Park Country Resort Sdn Bhd Superb Apparel Supply Sdn Bhd entered during the review period mainly from and Revenue Concept Sdn Bhd, for new and renewed leases. For Pavilion into a JV to introduce apparel retail the acquisition of a shopping mall REIT, the higher revenue was generated outlets under the brand name LOL. To be known as da:mén USJ Shopping Mall, mainly from asset enhancement and managed by Super Gem, the LOL stores at a purchase consideration of RM488 increases in service charges. will offer affordable fashionable apparels million. The five-storey retail mall has a to the mass market. For the 3Q2015 financial results, KLCC NLA of 420,920 sq ft and two levels of Stapled REIT registered revenue of basement car park with 1,672 bays. The After the disposal of its 28% stake in RM120.03 million, 2.55% higher year- sales is analysed to circa RM1,159 per Sushi Kin Sdn Bhd to Japanese fast- on-year (y-o-y) when compared to the sq ft on NLA basis. food restaurant Yoshinoya Holdings Co corresponding period in 2014. Ltd, Texchem Resources Bhd unveiled On August 5, Malaysian Resources its plan to expand Tim Ho Wan, Sushi Similarly, gross revenue of IGB REIT Corporation Bhd (MRCB) entered into King outlets as well as introducing new inched up 7.5% to register at RM120.96 a Sale and Purchase Agreement with restaurant concepts such as Yoshinoya million (3Q2014: RM112.55 million). Cardiac Vascular Sentral Kuala Lumpur Beef Bowl and Hanamaru Udon and The gross revenue for Sunway Pyramid Sdn Bhd (CVSKL) for the sale of Sooka coffee outlets (Doutor Coffee) via a JV Shopping Mall increased by 4.2% for Sentral. Sooka Sentral is a five-storey business strategy. financial year ended September 30, shopping centre (140,000 sq ft GFA) with one level of car park sited on a In November, Grand Companions Sdn 2015 mainly due to higher average net rent per sq ft. 60,945 sq ft land in KL Sentral. CVSKL Bhd, the franchiser of Tony Roma’s will undertake the redevelopment of Malaysia entered into a JV with The gross revenue for The Mines was Sooka Sentral into a specialist cardiac Ramacorp Inc, the US-based parent of reported at RM20.01 million, 1.63% and vascular centre which will house Tony Roma’s to open two TR Fire Grill higher than 3Q2014. a 70 over bed cardiac and vascular outlets in Malaysia. The first outlet is The completion of asset enhancement hospital. The Centre is expected to open slated to open in Kuala Lumpur by 2016. exercise and recent hike in service by end-2016. CVSKL is a subsidiary of Moving forward to first half of 2016, a charge generated gross revenue of Singapore-based TE Asia Healthcare total of 14 new shopping centres with RM99.62 million for Pavilion Kuala Partners (TE Asia), a TPG Capital a combined retail space of circa 4.61 Lumpur Mall in 3Q2015, marginally portfolio company. higher (0.7%) when compared to the million sq ft are expected to come on- On December 18, Berjaya Assets Bhd corresponding period in 2014. stream in Kuala Lumpur and Selangor. (BAssets) entered into a Share Sale They include Lulu Hypermarket @ The slowdown in the retail market has Agreement for the acquisition of 20% Jakel Square, , not deterred Pavilion REIT to expand equity interest in its subsidiary Berjaya Damansara City Lifestyle Mall, GLO its portfolio during this half with the Times Square Sdn Bhd (BTS) from Damansara and Bangsar Trade Centre proposed acquisitions of two shopping the Sultan of Johor for a total cash in Kuala Lumpur; and Sunway Pyramid malls in the Klang Valley, amounting to a consideration of RM250 million. The Phase 3, da:mén USJ Shopping Mall, The total transaction value of RM648 million. acquisition will enable BAssets to re- Square @ One City USJ 25, Aeon Shah The malls were appraised by Knight gain total control over the BTS Shares, Alam, M Square Shopping Mall @ Millenia Frank Malaysia, being the independent of which part of BTS’ principal activities City, Centrus Mall @CBD Perdana 3, registered valuer appointed by Pavilion include property investment, investment Gallerie @ De Centrum and Star REIT Management Sdn Bhd, the holding, operations of theme park, car City Shopping Mall in Selangor. manager of Pavilion REIT. park operator, hotel and commercial Despite facing a challenging year, On December 29, Pavilion REIT complex management.

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TABLE 5 Significant Shopping Mall Investment Sales 2H2015

Shopping Mall Location Approx. NLA (sq ft) Consideration (RM) / (RM psf)

Intermark Mall 1 Jalan Tun Razak, Kuala Lumpur 225,014 160 million (711) da:mén USJ Shopping Mall 2 Jalan Kewajipan, USJ 1, Subang Jaya 420,920 488 million (1,159)

1 Intermark Mall is a six-storey shopping mall which forms part of the integrated development known as The Intermark. The purchase consideration comes with a rental guarantee of RM15 million. 2 da:mén USJ Shopping Mall is part of an integrated commercial development known as da:mén, which comprises the shopping mall, 41 units of contemporary series of 2, 3, 5 and 6-storey shop / offices and 480 units of apartments housed in two (2) tower blocks with 6-level of podium car parks.

Source: Knight Frank Research Outlook expansion plans. manufacturers cum suppliers / consignees have also turned “pop-up” retailers to Demand for retail space at prime and The record low MIER Consumer Sentiment improve their cash flows. Index for the third quarter of 2015, coupled established regional and neighborhood with the weak local currency and the recent shopping malls with high footfalls, however, Consumers are becoming more prudent toll hike, are expected to further dampen will remain resilient. in their spending pattern following consumer sentiment over the next six Overall, the short term outlook for the local implementation of the GST and weakening months in 2016. retail industry is one of caution. of the local currency which collectively have reduced their spending power by For the full year of 2015, Retail Group The majority of retailers, especially those circa 30%. More grounded consumers Malaysia has revised downward the offering international brands and imported who have become well-informed projected retail sales growth rate for the products, have suffered due to higher shoppers through technology, are opting fifth time to 2.0% compared to the initial operation costs by 20% to 40%. They are for alternative shopping for affordable projection of 5.5%. becoming more cautious in their business and cheaper choices. This has led many operations - downsizing and closing non- With high impending supply totalling circa retailers to offer on-line and apps shopping profit outlets and selective in expansions. 4.61 million sq ft by 1H2016, retailers will as alternative platform for business growth. continue to be spoilt for choice. However, With more newer shopping centres offering The rise of online retail shopping amongst as the retail industry in Malaysia is set to larger retail space, it is noted that a handful the younger and tech-savvy population embrace heightened challenges in 2016, of regional and local retailers are taking up drives the courier delivery industry and the majority of retailers may adopt a ‘wait larger lots at competitive tenancy terms this augurs well for the logistics sector as and see’ approach and caution in their with attractive rentals and incentives. Many demand for warehouse space grows.

TABLE 6 Shopping Centres Scheduled for Completion / Opening in 1H2016

New Projects Location Estimated Net LettableArea (sq ft) Lulu Hypermarket @ Jakel Square KL City 300,000 Sunway Velocity Mall KL Fringe 850,000 Damansara City Lifestyle Mall KL Fringe 169,000 GLO Damansara KL Fringe 360,000 (previously known as G Avenue) Bangsar Trade Centre KL Fringe 230,000 M3 Mall KL Fringe 200,000 Sunway Pyramid (Phase 3) 62,000 da:mén USJ Shopping Mall Subang Jaya 420,000 The Square@ One City USJ25 120,000 Aeon Shah Alam Shah Alam 700,000 M Square Shopping Mall @ Millenia City 380,000 Centrus Mall Cyberjaya 110,000 Gallerie @ De Centrum 160,000 Selayang Star City Shopping Mall Selayang 550,000

Source: Knight Frank Research

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HIGHLIGHTS Penang Property Market

The Penang State Government Market Indications (PDC) to to formulate a masterplan to has awarded SRS Consortium, develop a 930-acre agricultural tract comprising Gamuda Bhd (60%), According to the latest Property Market in Byram and Changkat, located south Ideal Property Development Sdn Report 1H2015, the total volume of of into a high-tech Bhd (20%) and Loh Phoy Yen transactions for all sectors in the State industrial park for small and medium Holdings Sdn Bhd (20%), to be of Penang registered a drop of 11.3% sized enterprises (SMEs) with a gross the Project Delivery Partner (PDP) against 2H2014. In terms of value of development value (GDV) of RM1.8 to implement the RM27 billion transactions, the drop is a slight 2.2% billion. Meanwhile, PDC will develop Penang Transport Master Plan when measured against 2H2014 but 4,107.4 acres for heavy industries, SMEs (PTMP). a sharp 11% decrease compared to and mixed-use development. This joint The group recently announced 1H2014. Residential transactions which development project is expected to their planned rail linkages for the made up 69% of the total volume, make south Seberang an economic state which includes amongst recorded a drop of 17.5% for both the growth centre in Penang, in line with the others a proposed cross-channel number of transactions done and value state government’s plans. LRT linking on Penang for the period compared - 1H2015 vs 2H2014. In contrast, the commercial, The state’s focus on industry as a growth Island to the Prai Industrial industrial and development land sub- engine has in recent years shifted to Park on the mainland and then sectors registered positive growth the mainland from on the connecting onto two other showing increases of 6.8%, 56.4% and island, with multinationals signing up for proposed train services. 3.6% respectively in the number of deals new plants in , another major done for the corresponding period. development area in Seberang Prai. Eastern & Oriental Bhd (E&O)’s Construction works on the three highways High End Condominium Letter of Award to China to be built by Consortium Zenith BUCG Communications Construction Sdn Bhd (CZBUCG), namely the Tanjung Co Ltd (CCCC) to undertake land Bungah / pair road, a reclamation works for its Seri bypass linking to the Tun Dr Lim Tanjung Pinang Phase 2 (STP2) Chong Eu Expressway and a bypass comprises 2 packages:- award of joining Gurney Drive to Tun Dr Lim Chong Package 1 to reclaim Phase 2A, Eu Expressway, worth RM2.8 billion, which comprises the 253-acre is expected to start in the first quarter (102.4ha) STP2 island and the of 2016 with completion scheduled in 131-acre extension of Gurney 2020 /2021. The three highways are Drive, for approximately RM1.035 part of a RM6.3 billion mega project that billion, and the conditional also include a 6.5km undersea tunnel award of Package 2 to reclaim connecting Tanjong Tokong on the island to on the mainland. a 507-acre STP2 island for City of Dreams approximately RM1.285 billion. Penang Development Corporation (PDC) is collaborating with Temasek Holdings Ewein Bhd has launched its maiden and Economic Development Innovations property project, City of Dreams, in Singapore to develop a RM1.3 billion Bandar Tanjong Pinang, locally and Business Process Outsourcing Prime overseas and is now fully sold out. Ewein Zenith Sdn Bhd in which Consortium (BPO-Prime) Complex in . The Zenith BUCG Sdn Bhd (CZBUCG) holds complex, with a minimum gross floor area a 40% stake, will develop the seafront (GFA) of 1.6 million sq ft and to be built project featuring two blocks of 38-storey on a 2.8-hectare site currently housing towers comprising a total of 572 units, the PDC office, is set to be the catalyst with built-up areas ranging from 1,100 for Penang’s industrial transformation sq ft to 2,350 sq ft. The indicative price by creating a new cluster of economic for the seafront serviced apartments development in BPO, Knowledge Process with a total GDV of RM800 million is Outsourcing and Information Technology approximately RM1,500 per sq ft. The Outsourcing. Works are expected to start seafront development Bandar Tanjong in 2016. Pinang is a 110-acre (44.5-hectare) Sime Darby (Utara) Sdn Bhd has inked parcel of reclaimed land in Tanjung a memorandum of understanding (MoU) Pinang that was given to CZBUCG with Penang Development Corporation by the Penang State Government

13 as a compensation-in-kind for the rents secured at the newer Hunza Tower OUTLOOK construction of the RM6.3 billion Penang over are about RM3.50 undersea tunnel and three bypass per sq ft per month and occupancy rate With the global and local economic and roads. The group will also be developing is 100%. political uncertainties still looming over “Wellness City of Dreams”, a wellness the nation, the challenging scenario Average occupancy rate at Suntech hub with a reported GDV of RM13.89 continues. and Menara IJM Land, both newer billion on this same parcel. office buildings located outside the city, Overall volume of transactions have In line with the high-end condominium currently stands at 94%, a drop of about dropped 11.3% in 1H2015 compared market expectation, many of the newer 3% compared to 1H2015. Asking rents at to 2H2014 and the trend is expected to launches offer units that are fitted out these two buildings range from RM2.60 continue. However, there have not been with kitchen cabinets c/w hood, hob, to RM3.30 per sq ft per month, with one any recorded decrease in value as yet. oven, light fittings, air-conditioning units building recording slightly lower rents. The consolidation of the residential sub- and quality sanitary fittings amongst the sector continues as evidenced by its drop main items offered. RETAIL of 17.5% in the volume of transactions Recorded transactions of newer larger The existing supply of purpose-built which is the highest drop among the sized condominiums with built-up areas shopping space on remains property sub-sectors. from 3,500 sq ft to 6,000 sq ft in the unchanged at 1H2015’s level of 6.69 million In the office sector, some pressure secondary market in Tanjong Bungah sq ft. No new purpose-built shopping malls on rental rates will be expected as in 2015 range from RM577 to RM896 were completed on the island in 2H2015. per sq ft. In / Gurney Over on the mainland in , occupancies have decreased slightly and Drive, similar large size units of 4,200 Wholesale Hypermarket, a 3-storey there are not much office formation or sq ft sold for RM763 to RM958 per sq building with about 1.15 million sq ft space, expansion. opened for business on November 20th. ft whilst smaller sized units at newer The retail sector, as a whole, is developments in Gurney Paragon and There are several proposed shopping malls anticipated to face even more serious have been resold at coming up over the next 5 years on the pressures as new supply is still being prices ranging from RM830 to RM1,330 island, please refer Table 7. constructed amidst the projection per sq ft. of subdued retail sales and negative Occupancy rates for the prime shopping consumer sentiments which have led Despite it being a tenants’ market malls on the island range from 80% to many retailers to abandon expansion with the increased supply following 97.5% whilst for the secondary shopping plans or put them on hold. However, a the completion of several new malls, the range is generally from 70% to small number of prime and well-managed condominiums, some asking rents are 90%. still high. Landlords continue to ask malls are expected to attract high foot-fall RM8,000 to RM16,000 per month for fully In prime shopping malls, rental rates for and maintain reasonably stable rentals. furnished units in newer developments ground floor retail lots generally range from The less attractive malls will not perform whilst for older condominiums, asking RM13 to above RM35 per sq ft per month, as well. rentals generally range from RM4,000 to depending on the mall, location and size of Overall, the outlook appears lacklustre. RM8,000 per month. the units. OFFICE TABLE 7 The existing supply of office space Future Supply of Retail Space within Penang Island (buildings of 10-storey and above) on Penang Island remains at 1H2015’s level of 5.59 million sq ft. Commercial Suites, a 16-storey office block with retail space on the ground floor and multi-storey car parking on the 1st to the 4th floors and currently under construction, will contribute about 115,000 sq ft net lettable space of new supply when completed as scheduled in 2016. The occupancy rates for the three prime office buildings monitored in Georgetown remains at 1H 2015’s level, ranging from 85% to 100%. Current asking rentals for the older buildings generally range from RM2.80 to RM3.00 per sq ft per month, the same level as 1H2015. The latest Source: Knight Frank Research / NAPIC

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HIGHLIGHTS property Market

Iskandar Malaysia continue Market Highlights IHH Healthcare Bhd has opened its to register positive growth in Gleneagles Medini Hospital in November As of November 2015, investment, both local and 2015. The hospital on a 15-acre site will has registered cumulative investments foreign. As at November 2015, feature 300 beds and a 162-suite medical of RM187.96 billion, mainly from the office block. the cumulative investment was at manufacturing sector which accounted for RM187.96 billion compared about 27.72%. Approximately 41% of the Under Budget 2016, Refinery and to RM156.35 billion in October total investments are from abroad, with Petrochemical Integrated Development last year. the top five countries being Singapore, Project (RAPID) Complex in , United State, Spain, and China. Johor will get a further investment of RM18 Approximately RM93.39 billion or about billion. Slower absorption rate in the high 50% of the total investments has been Construction firm Bina Puri Holdings Bhd rise residential segment amid a realised. cautious property market. has received a letter of intent from PR1MA In December 2015, Kulim (Malaysia) Corporation Malaysia (PR1MA) for the Berhad had entered into a Sale and construction of four blocks of apartments Infrastructure projects, namely Purchase Agreement with Johor with 994 apartment units with built-up the High Speed Rail (HSR) Corporation (JCorp) for the proposed areas ranging from 950 sq ft to 1,100 sq ft and Rail Transit System (RTS) acquisition of 14.0 acres of 60-year and 20 shops with built-up area of 1,630 sq are expected to spur further leasehold industrial land expiring on 18 ft each. The project is sited on an 18.23- economic growth. May 2060 in Kawasan Perindustrian acre freehold land at Mukim in for a total consideration of Masai and is scheduled for completion in RM17.93 million or RM29.40 per sq ft. 36 months. The land is currently rented by EPASA Shipping Agency Sdn Bhd, wholly-owned The Johor State Government and Iskandar subsidiary of Sindora Berhad, which Regional Development Authority (IRDA) are in turn is a wholly-owned subsidiary of drafting the master plan for eco-tourism Kulim, at the rate of RM90,000 per month for the two villages, Kampung Kuala Masai or RM1.08 million per year from JCorp. and Kampung Pasir Gudang Baru. The plan is to be re-create Thailand’s famous In November 2015, a transformation plan floating markets here with Sungai Masai referred to as the Ibrahim International and Sungai Johor as the main rivers. The Business District (IIBD) was launched. master plan is expected to be ready in four The IIBD transformation plan covers 250 months. acres within Johor Bahru city centre and is bordered by Jalan Ayer Molek, Jalan Malaysia’s first Pan Pacific Serviced Suites, Tun Sri Lanang, Jalan Tun Abdul Razak a joint venture by Singapore-based real and Jalan Sultan Ibrahim. Coronation estate developers Pacific Star and DB2, is Square will be the first project under scheduled to open in early 2018 at Puteri the IIBD transformation plan measuring Harbour in Nusajaya. Sited on 7.8 acres of approximately 6.32 acres with with a gross land, the 205 units of serviced suites are development value (GDV) of RM3 billion part of premium waterfront mixed-used and will comprise six towers which are a development, Puteri Cove Residences, hotel, a hotel with residences, an office, alongside SOHO units and a two-level high-rise medical suites and two serviced waterfront retail promenade. The serviced apartment towers, and a mall with an suites will offer studio, one and two estimated GFA of 80,000 sq ft. The bedroom apartments occupying 16 floors medical suites will be managed by JCorp of Tower 3 of the apartments. and KPJ Healthcare while the serviced BCB Berhad acquired a 22-acre leasehold apartments to be developed by Coronade Properties Sdn Bhd are targeted to open land, referred to as Plot C1 of Zone C of for sale in mid-2016. KPJ Healthcare had , for RM58.5 signed a Sale and Purchase Agreement million or RM61 per sq ft. The proposed with Coronade Properties Sdn Bhd for development consists of 175 units of three the proposed acquisition of commercial or five storey shop lots with an expected parcel(s) representing approximately GDV of RM400 million. 125,000 sq ft in GFA in a building to be Johor Corp’s (JCorp) Islamic REIT, named erected for RM90 million or RM720 per Al-Salam REIT was listed on the Main sq ft. Market of Bursa Malaysia in September

15 2015. Al-Salam REIT initial portfolio City Square Development sited on a block and a children’s theme park. It is consists of 31 assets which include 3.5-hectare of land. The two hotels will expected to be completed by 2019. Komtar JBCC, Menara Komtar, @Mart be complemented by a major shopping New shuttle train services, Shuttle , hypermarket, KFCH College and the chain centre, a 150,000 sq m convention centre has received good response from of 27 KFC and Pizza Hut restaurant outlets and office buildings located near to the nationwide and selected industrial assets. High-Speed Rail station and Nusajaya commuters. Shuttle Tebrau can The REIT will be managed by Damansara technology park in Nusajaya. accommodate about 320 passengers per REIT Managers Sdn Bhd. trip between JB Sentral and Woodlands The construction of the Dato’ Onn station in Singapore and offers 14 trips In September 2015, Rowsley announced Specialist Hospital, a 9-storey hospital daily. the re-conceptualised of the Vantage block with 150 beds, has been awarded Bay project, (originally a mixed-used to Pesona Metro Holdings Bhd via The Johor State Government had lifestyle township), to a healthcare city an RM144.17 million contract. The announced the draft of Johor Strait comprising a medical hub, a healthcare construction project will take around 15 Development Corridor Master Plan (KPSJ) education hub and a wellness hub, with months commencing from October 2015. which stretches 98km from Tanjung an expected GDV of RM5 billion. It is Piai in the west to Sungai Johor in the I-Park Development Sdn Bhd has situated adjacent the upcoming Thomson east which covered an area of about acquired a 188.7-acre freehold land at Iskandar medical hub. The decision to 121,517 acres. The plan is to increase the for RM370 million or RM45 per sq convert the development from a township competitiveness of Johor property market ft. This new extension of the i-Park brand, to a healthcare city was partly due to and protect local buyers and is expected i-Park@Senai City, is expected to the current and in-coming completion be launched in the 2Q2016. The integrated to be finalised by next year. of high-rise residential apartments in industrial park will be developed in three Iskandar Malaysia. In December 2015, phases over a period of at least seven RESIDENTIAL Thomson Medical inked a memorandum years. of understanding (MoU) with Rowsley to The uncertainties caused by negative work together to conceptualise, develop In August 2015, Yong Tai Berhad had external news and the concern of a and promote the healthcare city. entered into a MOU with Land & Build possible oversupply of residential units Sdn Bhd to acquire the entire equity in the state, has caused the high-rise A ground breaking ceremony was held in interest of the company which holds sector to continue to cool. There has been late September for the commencement of the development rights for a mixed a significant reduction in the number of development of Hotel KPMNJ, a three- development project on 1.77 acres of land new property launches, especially for hotel sited on a 0.7522-hectare land in Johor Bahru. The mixed development high-rise residential sector. Some of the in Jalan Ayer Molek, Johor Bahru. To project comprising retail and SOVO units, notable residential launches in the second be developed by Koperasi Permodalan hotel and office suites is expected to have half of 2015 are as follows:- Melayu Negeri Johor (KPMNJ), the a GDV of RM363 million. 8-storey hotel with estimated GDV of Sunway Iskandar has pre-launched 222 RM40 million will offer 116 rooms. Tebrau Waterfront Residences and Resort units of Emerald Residence in Zone F development will launch the first phase Medini, Nusajaya. The project comprises Tropicana Corp Bhd’s special purpose of its joint-venture project with China linked houses with built-up areas ranging vehicle (SPV) Tropicana Danga Senibong developer Greenland Group and Iskandar from 1,919 sq ft to 2,439 sq ft, selling Sdn Bhd (formerly known as Renown Waterfront City Bhd in early 2016. The from RM888,000 per unit, superlink Dynamic Sdn Bhd) has cancelled its 51-hectare development located on the houses with built-up areas ranging from acquisition of a 34.2-hectare leasehold coast of Johor Straits, is divided into five 2,681 sq ft to 3,166 sq ft, selling from land meant for a RM3.7 billion mixed phases and will take 10 to 15 years to RM1.3 million per unit and semi-detached development project in Johor Bahru. complete. The first phase, spanning 4.46 houses with built-up areas ranging from Bangsar Height has signed a licensing hectares, will be developed with mixed 3,927 sq ft to 4,290 sq ft, selling from agreement with Antara Holiday Villas Sdn residences, a retail podium, an office RM2.3 million per unit. Bhd for D-Villa Hotel & Residence Johor Bahru City Centre. The agreement will see Holiday Villa managing the hotel segment of a 30-storey high-end residential development, Causeway Regency with 360 units of suites sized from 305 sq ft to 540 sq ft per suite. It is targeted to welcome both tourists and business travellers when it opens in 2018. PJM Group has joined hands with Spanish hotelier Melia Hotels International to build two luxury hotels, a five-star Melia Iskandar Malaysia hotel with 450 rooms and a four-star Innside Iskandar Johor Emerald Residence with 350 rooms, for the Rentak Iskandar

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Shama Medini, a buy-to-lease serviced BCB Berhad has officially launched Elysia OFFICE apartments on a 5.03-acre integrated Park Residences in August 2015. The As at 2Q2015, the total net lettable area development, UMCity Medini Lakeside project, on 7.82 acres of leasehold land in (NLA) of purpose-built office space in Medini by UMLand, will offer 196 Medini, features a 4.8-acre Mahkota Park. which includes private buildings and units of fully furnished apartments. Phase 1, with three blocks, offers 355 units government buildings in Johor Bahru Shama Medini will be managed and in eight available configurations sized from operated by Thailand-based hospitality stands at approximately 8.68 million sq 516 sq ft to 1,252 sq ft. Prices range from assets management company, ONYX ft with an overall average occupancy RM480,000 to RM1.1 million. Hospitality Group. The units are available rate of about 77.6%, a slight increase in four layouts ranging from 583 sq ft to Eco Tropics sits on a 303.5-hectare site as compared to the previous quarter. 1,192 sq ft with average selling price at located at , Pasir Gudang. It is Private buildings currently accounts for approximately 70.85% (6.15 million sq RM1,300 per sq ft. UMLand also targets being developed by EcoWorld and has an ft) of total purpose-built office space in to launch Citadines, a serviced apartments estimated GDV of RM3.4 billion. Phase 1 Johor Bahru. managed by ONYX Hospitality Group offers 558 units of double-storey terraced within the mixed development UMCity houses with typical built-up area of about Rentals of prime and non-prime CBD Medini Lakeside, by early 2016. 1,700 sq ft, selling from RM460,000 per office space remained stable with asking Ramada Encore Meridin, is a two block unit and 500 units of double-storey cluster gross rental for prime space ranging from of buy-to-lease serviced apartments with houses with built-ups of 2,200 sq ft to RM2.50 to RM3.50 per sq ft per month a total of 622 units within the mixed use 2,700 sq ft, priced from RM620,000. while non-prime office space command development of The Meridin at Medini, gross rental of between RM1.80 and Nusajaya. The developer, Mah Sing A joint venture company between Kuok RM2.50 per sq ft per month. These rates Group has signed a franchise agreement Group, Khazanah Nasional Berhad and are generally inclusive of the provision of with Wyndham Hotel Asia Pacific to PPB Group Berhad has officially launched shared services comprising centralized procure the Ramada Brand System for the Southern Marina Residences located air conditioning, security and cleaning these serviced apartments and it will be in Puteri Harbour, Nusajaya. The two services for the common areas. operated by Topotels Sdn Bhd. The hotel condominium tower blocks comprise The incoming supply of purpose-built suites featuring studio, one and two- 456 units, offering 1+1, 2+1, 3+1 and office building is expected to be from bedroom units ranging from 318 sq ft to penthouse units with built-up areas Medini Iskandar Malaysia Sdn Bhd’s 885 sq ft are targeted to be operational by ranging from 769 sq ft to 3,317 sq ft. development at Medini, Nusajaya. The 2018. Selling prices start from RM880 per sq ft. development of Medini 9, a 21-storey IJM Land Bhd’s has launched its new township project, Austin Duta. The FIGURE 3 250-acre project will be developed in 12 Office Supply and Occupancy Trend in Johor Bahru (2005 – 2Q2015) phases. The first phase, offering 183 units of double-storey terraced houses with dimension of 24ft by 70ft and typical built- up of 2,150 sq ft, has achieved a take up rate of 60%. The selling price starts from RM650,000 per unit ARC @ Austin Hills, a high rise apartment project jointly developed by Andaman Group and Majlis Bandaraya Johor Bahru is located on a 5.11-acre land in Mount Austin. The project features three blocks comprising a total of 1,843 units. The first two blocks have achieved circa 50% sales since its launch on July 31 whilst the third block is scheduled for launch in February 2016. The ARC @ Austin Hills offers two and three-bedroom units with sizes ranging from 650 sq ft to 900 sq ft, priced at RM420 per sq ft on average. UEM Sunrise has officially launched Phase 1 of Estuari in Puteri Harbour, Nusajaya in early August 2015. Phase 1 of the project consists of 350 units of double- storey superlink houses with built-up areas ranging from 2,708 sq ft to 3,780 sq ft. Prices start from RM1.39 million per unit. Source: Knight Frank Research / NAPIC

17 building with circa 380,000 sq ft NLA is plots of freehold land measuring 9.76 The first phase of VADS Nusajaya Data expected to be completed by 1Q2018. acres in i-Park, for a total Centre is scheduled for completion in consideration of RM61 million. Each land 1Q2017. RETAIL parcel is improved with a single-storey -based Mitsui and Co Ltd has detached factory, annexed 2-storey office As at 2Q2015, the total NLA of retail space entered into a joint venture agreement with (includes shopping centres, arcades and building and other supporting structures. Nusajaya Tech Park Sdn Bhd to undertake stand-alone hypermarkets) in Johor Bahru The properties are currently leased a 10.7-hectare development, comprising stands at about 11.74 million sq ft with to Beyonics Technology for 10 years, built-to-suit (BTS) properties for lease. average occupancy at 79.5%. Prime retail expiring on July 31, 2025. The project will have an estimated GDV of space continued to perform well with UMLand is partnering Johor RM468 million over four years. occupancy rates recorded in excess of Biotechnology and Biodiversity Corp EcoWorld has launched Eco Business 80%, commanding gross rentals ranging (J-Biotech) to develop a halal biotech Park III. Located next to Eco Tropics in from RM15 to RM40 per sq ft per month. park, called Johor Biotech Park, in Felda Kota Masai, Pasir Gudang, the project In August 2015, WCT Holdings Bhd Cahaya Baru, Pasir Gudang. The park, offers 120 units of cluster factories and officially launched Paradigm Mall Johor with estimated GDV of RM1.5 billion, 86 units of semi-detached factories with Bahru (previously the abandoned will be developed over the next seven built-up areas from 4,000 sq ft and 6,000 Kemayan City Mall ). Located on a years. The first phase, featuring 89 units sq ft respectively. 13-acre freehold tract along the of double-storey factories, shophouses, Highway, the six-storey Paradigm Mall a dormitory for up to 600 workers and an OUTLOOK international Islamic school, is targeted to with estimated GFA and NFA of 2.7 million Without any exciting news in the 2016 be completed by 1Q2017. UM land is also sq ft and 1.25 million sq ft respectively, budget, the cooling measures and tighter reportedly in talks to acquire two plots of is targeted to open by September 2016. lending conditions implemented in 2014 The mall offers some 600 units of shops land measuring 80.9 hectares and 121.4 is expected to continue to cool down the and comes with 4,200 car park bays. hectares in the Iskandar region. property market, especially for the high- Secured anchor tenants include SOGO, VADS, a wholly-owned subsidiary of rise residential units. Village Grocer and GSC cinema. The mall Telekom Malaysia (TM), has launched is part of the integrated development of The general focus of interest in Iskandar a ground breaking ceremony for its Malaysia will be the progress of the High Paradigm JB which also includes a hotel two-phase purpose-built data centre Speed Rail (HSR) and the Rail Transit and a serviced apartment tower. in Nusajaya Tech Park. It will house System (RTS) as these infrastructure INDUSTRY TM Iskandar international gateway, will projects are expected to enhance the serve as a regional hub in providing property market around the designated There were severable notable industrial services such as end-to-end managed stations. activities in this half and they include the ICT services, BPO services, Cloud Currently, developers are cautious about following: Services via Digital Marketplace and high- property launches especially for the high- speed broadband connectivity, serving In line with its long-term target of having rise residential units in view of the slower customers in Malaysia and the ASEAN RM3 billion worth of assets under absorption rate. The region will take time region. management, Axis REIT acquired four to digest the existing and incoming high- rise residential supply.

The full impact of the Goods and FIGURE 4 Services Tax (GST) has yet to be Retail Supply and Occupancy Trend in Johor Bahru (2005 – 2Q2015) ascertained, although the general perception is that all goods and services have generally increased in prices. For 2016, the general outlook for the property market in Iskandar Malaysia remains lukewarm especially the high-rise residential sector. Landed properties are still favoured by the locals although it is expected that in the coming years it will be challenging as more developers are turning into landed developments with new and exciting concepts.

Source: Knight Frank Research / NAPIC

18 real estate highlights malaysia

HIGHLIGHTS KOTA KINABALU

The Director of Town and Market Highlights 1. Develop Kota Kinabalu and the Regional Planning Department adjoining districts of and (TRPD) has recently released Similar to the first half of 2015, Kota as a vibrant Metropolitan City “The Structure Plan 2033”. Kinabalu property has seen little activity in the primary market. Developers 2. Improve the existing rail link and continued to take an apprehensive view extend it further to Kudat Sabah recorded a budget surplus on launching new projects given macro- 3. Improve the public transportation of RM6.8 billion in August 2015. economic conditions and the lending system in KK by introducing environment. Values across all sectors light Rapid Transit (LRT), Bus continued to remain stable, though The opening of sets rapid Transit (BRT) or other modes of transaction volume remained weak. new benchmark for office sector alternative transportation systems Based on Property Market Report First in Kota Kinabalu. Half 2015 by NAPIC, Sabah registered 4. plan for future relocation of the Kota 4,273 transactions with a total value of kinabalu International Airport (KKIA) Developer with sizeable land RM2.2 billion (inclusive of both primary In preparation for Kota Kinabalu and banks in fringe areas shifting and secondary market), a decrease of its adjoining districts to grow into a focus to affordable and mid- 3.0% and 7.0% in volume and value Metropolitan City, implementing the range housing developments to respectively against first half of 2014. right model of urban transport system is drive sales. Interest in capital markets acquisitions by essential as it has an important impact local and particularly foreign corporates on land consumption, especially with the and institutions has increased, albeit at an state’s preserved nature and conservation investigative and due diligence level. Up areas in place. Conversely, with the to August 2015, Sabah posted a budget right model of transportation network trade surplus of RM6.8 billion despite in place, it will unlock an abundance tough market conditions and the medium of opportunities to the growth of the to long term outlook remains positive. city in terms of social and economic development; as urban productivity is The Sabah Structure highly dependent on the efficiency of its transport system to move labour, Plan 2033 (SSP2033) consumers, and freight between The Director of Town and Regional multiple destinations. Besides that, the Planning Department (TRPD) has expansion of the transportation network recently released the much anticipated will also support the projected spatial “The Sabah Structure Plan 2033 development structure of Sabah as well (SSP2033)”which represents a macro as being used in a proactive manner to long-term strategic document that will encourage development in planned areas. guide and direct the Sabah’s future The first phase of the Pan Borneo physical growth and development up to Highway in Sabah will commence 2033. construction in the first quarter of 2016, The structural plan aims to provide the according to Prime Minister Datuk Seri population with high quality of life, a . The proposed construction sustainable environment, a successful was part of the Barisan National (BN) economy and a connected state manifesto during the general election through an effective transportation campaign back in 2013 as an effort to and Information and Communication fulfil the government’s high commitment Technology (ICT) network. In order towards infrastructural and economic to achieve the aforesaid vision and development in Sabah. The RM27 goals, development strategies are the billion construction spanning across essential processes in providing clarity 2,239 kilometres will be the main artery in the development directions, and also connecting Sabah, Brunei and in policy guidelines for local plans and the future, which plays an important role stakeholders alike. in boosting ties between both Malaysian states, Brunei and Kalimantan . Focusing particularly on the with Kota Kinabalu, the key The Works Ministry has submitted development strategies proposed by proposals to build 10 flyovers at four SSP2033 are as follows: major roads in Kota Kinabalu under the

19 11th Malaysia Plan (11MP), in addition to analysed at circa RM30.20 per sq ft. With Ho Hup (KK) Sdn Bhd (HHVKK) along with two flyovers at Jalan Kolam traffic light this purchase, the company is currently in Tribeca Real Estate Asset Management intersection and Mile 5.5, Jalan its preliminary stage of planning a mixed have made significant progress on the which was initiated back in January 2015. development of commercial and landed construction of the Wawasan DBKK car Works Minister Datuk Seri Haji Fadhillah residential phases. park and bus terminal. Their approved Haji Yusuf identified the project as part hotel, luxury condominium and retail Gabungan AQRS Bhd and SBC of the outer ring road project in Kota development is in final design phase Corporation Bhd’s respective joint Kinabalu which would be implemented with Singapore’s award winning DP ventures with Suria Capital Holdings in phases as it requires a cost of RM1.11 Architects and we expect residential Bhd at the old Jesselton Port area are billion. sales of the project launching in 2016. progressing through planning stages and Currently referred to as Golden Sails, the Kota Kinabalu International Airport are forecast to launch in 2016. Within the residential component will comprise 322 Terminal 2 has confirmed to cease Kota Kinabalu CBD area, these are two luxury condominium units boasting South its operations as a low-cost terminal of the most significant masterplanned, China Sea, Mount Kinabalu, Sembulan on December 1, 2015, and will move mixed use developments set to transform River and city views, located on one of to Terminal 1 due to exceeding its the coastal skyline. Both projects are the last remaining waterfront locations in passenger capacity of two million highly anticipated in the market and the CBD. passengers per annum. In 2014, terminal expected to achieve strong take up rates 2 alone had registered passenger traffic domestically and by foreign buyers. RESIDENTIAL of 3.6 million people. Terminal 1, built at Due to uncertainties caused by the a cost of RM1.7 billion has the capacity Major mixed use developments such as weakening of the ringgit and continued of 9 million people and 64 counters to , Sutera Avenue and PacifiCity tight lending conditions, there have are continuing to progress through cater for both domestic and international been no significant new launches of construction, however, there is some flights. Consolidation of AirAsia’s flights to projects by developers in Kota Kinabalu delay on the expected completion time Terminal 1 is also expected to provide a in the second half of 2015, but rather for the developments mainly due to greater sense of arrival for all passengers new phases and balance units in unfavourable weather and the macro entering Kota Kinabalu. larger schemes and a few residential economic environment. Based on the Sabah Housing and developments that are particularly Real Estate Developers Association JC Alliance has recently joint ventured focused on the affordable and mid-range price brackets. Updates of selected (SHAREDA), the gross development value with Hap Seng Land to establish Hap residential projects in Kota Kinabalu are (GDV) of new property launches in Sabah Seng Land Development & JCA Sdn Bhd as follow: has plummeted significantly from RM7.65 for a residential high-rise development billion in 2013 to RM3.75 billion in 2014 within the vicinity of Taman Seri Ketiau After an extended absence in Sabah’s and further fell to RM1.5 billion this year in Putatan, Sabah. JC Alliance with their west coast, Hap Seng properties is to date due to key factors such as the newly inked JV partner Hap Seng Land making a strong comeback in Kota abolishment of the Developer Interest is planning to acquire more landbank in Kinabalu with two upcoming projects in Bearing Scheme (DIBS), stringent lending Putatan as they foresee a greater growth both the northern (Kingfisher ) and conditions, the weakened ringgit and spur in the area driven by the Pan Borneo southern corridors (Kingfisher Putatan) of delays in the approval of development Highway influence in gentrifying outer the city. Kingfisher Inanam Condominium, plans. urban and rural areas. a gated and guarded project by Hap

In September, Shangri-La International Hotel Management Ltd and Pacific Sanctuary Holdings Sdn Bhd jointly announced the first Hotel Jen in Borneo. Opening in 2018, Hotel Jen Kota Kinabalu will be strategically positioned in PacifiCity, a premier integrated shopping, entertainment and lifestyle hub located in the picturesque Bay. The opening of Hotel Jen will be the third hotel property in Sabah for Shangri-La, reinforcing their presence in the state.

In a move to expand its property portfolio and strengthen its visibility in Sabah following the successful opening of Imago Mall, Asian Pac Holdings Sdn. Bhd has acquired a 16.57-acre leasehold Site progress of Golden Sails land in Papar, Sabah for RM21.8 million,

20 real estate highlights malaysia

Seng Properties development Sdn Bhd project is the first GreenRe silver is poised to deliver a residential project rated building in Sabah based on Real that is both affordable and top-quality. Estate Housing Development Association The 25-storey condominium offers a of Malaysia (REHDA)’s GreenRE Rating. total of 257 units with sizes ranging from 865 sq ft to 1,160 sq ft, currently open OFFICE for registration at an indicative price of The existing supply of office space has RM440 per sq ft. Kingfisher Putatan is a increased by 4.8% after 3 years of little 15-storey condominium comprising 120 addition to the sector, with the recent units ranging from 1,009 sq ft to 1,065 completions of Plaza Shell and Riverson sq ft at an indicative price of RM400 per Suites. The current supply stands at sq ft. Kingfisher Putatan is believed to 6.22 million sq ft with the new influx of be a turning point in the transformation 289,740 sq ft of office space into the of Putatan into a more mature and market. By the second half of 2015, the diverse residential neighbourhood in average occupancy rate of office space is line with its expanding role as a modern peaking at 91.8%. There is also a positive transportation and commercial hub. shift in average rental rates of office Mah Sing Group Berhad has launched space in Kota Kinabalu, mainly attributed another phase of its serviced apartment, to the first Grade A Office Building in Plaza Shell Tower 3 of Sutera Residences which was the state – Plaza Shell. Traditional rental held in May 2015. Tower 3 is the second rates have hovered around the RM2.00 friendly building, in tandem with Hap tower launched following an encouraging to RM3.50 per sq ft range, however the Seng’s desire to provide a healthy and response from the first launch of Tower 2. quality and standard of construction productive working environment to the The serviced apartments will be available of Plaza Shell allowed it to achieve a tenants whilst embracing environmental in two layouts, namely 1+1 and 2+1 rental rate of minimum RM4.50 per sq sustainability as part of their business bedrooms with built-up areas ranging ft exclusive of service charges. Kota core values. The opening of Plaza from 726 sq ft to 1,220 sq ft priced from Kinabalu’s newest landmark, Plaza Shell Shell not only represents the future ties RM605,000 onwards. was officiated by Sabah Chief Minister between Shell Malaysia and the state, but Datuk Seri on November has also set new benchmarks in design, Jesselton View by Bina Puri Holdings 13, 2015. Plaza Shell is the first Grade A quality, efficiency and environment for Berhad, located at the suburb of Hilltop office tower that is in compliance with the Kota Kinabalu’s office sector. Knight is a low-density apartment development Green Building Index (GBI) in the state, Frank Malaysia is proud to have secured offering 80 units housed in 5-storey and and was awarded the Silver Certification Shell Malaysia as anchor tenant for the 11-storey blocks with built up areas under the Leadership in Energy and building and is honoured to be appointed between 809 sq ft and 2,922 sq ft, priced Environmental Design (LEED). property manager for Plaza Shell. from RM533,000 to RM2.08 million. The new eco-friendly building has been As of second half of 2015, there were no One Jesselton @ Ridge is a conceptualised as a resource-efficient, new launches for purpose-built offices new proposed development by Bina high-performing, environmentally after the completion of Plaza Shell. Puri Holdings Berhad featuring a gated and guarded 12-storey condominium development conveniently located FIGURE 5 along Jalan Banjaran, Kepayan. The Occupancy Rate of Office Space in Kota Kinabalu (%) dual key and semi-eco environmental development comprises 125 exclusive units with sizing ranging from 964 sq ft to 2,660 sq ft and prices starting from RM670 per sq ft.

Following solid take up rates at the Bay 21 condominium project, Bay 21 TOO is the latest brainchild of Remajaya Sdn Bhd; with its ideal location along the picturesque Likas Bay. This 26-storey building consists of 286 luxurious furnished units ranging from one to three bedrooms; whilst unit sizes range from 395 sq ft to 1,248 sq ft. The development will introduce revolutionary construction methods that will set a higher quality of Source: NAPIC (as of October 2015) standard for developments in Sabah. The

21 TABLE 8 Asking Gross Rental of Selected Office Space in Kota Kinabalu (2015) (RM per sq ft / month)

Source: Knight Frank Research (as of October 2015)

Ongoing sales and supply of office space as Mah Sing Group Bhd, SP Setia Retail shop lots are seen to be struggling are as follows: Berhad, and Gabungan AQRS Berhad to secure tenants more than shopping have plans to incorporate Grade A malls, though we maintain that retail Riverson Suites by Riverson Corporation purpose-built office buildings as one of malls are likely to face continued fierce Sdn Bhd is strategically located within their key components for their upcoming competition amongst one another as new the rapidly growing Southern Fringe of integrated developments. This is supply is added to the market in 2016 KK CBD, sitting on a prime commercial expected to attract more multinational with the completions of Pacific Parade land of approximately 5.5 acres with and local corporations to venture into @ PacifiCity, Sutera Avenue Retail Mall, a gross development value (GDV) of Kota Kinabalu’s office sector. Riverson Walk @ Riverson and Jesselton RM555 million. Riverson Suites is part Mall @ Jesselton Residences. of the Riverson mixed development, RETAIL comprising of a tower of 6-storey office Mature retail markets such as Hong Kong suites with typical unit size ranging The additions of Oceanus and Imago and Singapore illustrate approximately from 2,192 sq ft to 4,232 sq ft. The malls earlier this year added 22.7% of 11.5 sq ft of retail space per capita. development which was launched in supply to the sector and has shaken Based on ’s 2011 is at its final construction stage, occupancy rates and rents. Coupled with population, we estimated the retail with Occupancy Certificate (OC) in place the introduction of GST and a decline in space per capita to be approximately for its office segment (Riverson Suites) domestic consumer spending, the retail 9 sq ft currently and deem this to be and it is understood that an occupancy sector will need to bolster foreign tourism unsustainable in light of domestic take-up rate of 100% has been pre- spend during this market downturn. consumption and tourist retail receipts. committed.

Another notable development in FIGURE 6 the pipeline is the new Sabah State Administrative Centre located at Likas Cumulative Supply of Net Retail Space Within Kota Kinabalu Bay, covering a 15-acre land site along the shoreline overlooking the South China Sea. The RM388.7 million worth project awarded to Bina Puri Holdings Bhd entails the construction of a 33-storey office tower and two blocks of 9-storey buildings, making it one of the tallest structures in Sabah. The development is expected to be completed in 2016, and will accommodate the Sabah Chief Minister’s office together with cabinet members upon completion.

Looking ahead, major developers such Source: Source: NAPIC / Knight Frank Research (as of October 2015)

22 real estate highlights malaysia

TABLE 9 Future Supply of Retail Space in Kota Kinabalu (sq ft)

Source: NAPIC / Knight Frank Research (as of October 2015)

MARKET OUTLOOK market supported by a rise in primary in light of the currency situation. market launch prices. Land costs Despite continued volatility in the global With a lacklustre year behind us, continue to increase and coupled with economy, Sabah is expected to weather Kota Kinabalu is expected to regain GST, minimum wage hikes, a weak the storm with its strong fundamentals development and growth momentum ringgit and inflationary pressure, it is not in oil, gas and energy and the palm oil going forward. We expect developments possible for developers to lower their trade, albeit against commodity price and which were put on hold in 2015 to hit the margins. market in 2016, however we maintain currency pressure. The tourism sector will that lending conditions need to improve Foreign investment at an institutional and play an important role in bolstering state in order for developers to achieve strong consumer level is highly anticipated for coffers and we believe that there will take up rates. development investment opportunities be a greater focus on the development and new launches, and we are optimistic of tourism products and supporting Values are expected to maintain stability that offshore take up rates for properties infrastructure in the coming year. across all sectors in the secondary in sought after locations will be attractive

Sabah International Kota Kinabalu Jesselton One Convention Centre (SICC) Convention City (KKCC) Quay Jesselton

Planned Developments for Regeneration of Kota Kinabalu Jesselton Port Area. Image courtesy of Dragonfly Robotix

23 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 Associate Director +603 228 99 672 [email protected] Research & Consultancy Judy Ong Mei-Chen Executive Director +603 228 99 663 [email protected]

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