KL: No approvals for new office except for own use

KL is said to be facing an oversupply offices. This is especially with another 118-storey tower coming up. Read here: 118 is higher than 88 definitely, but Perhaps this is the reason why the Federal Territories Deputy Minister Datuk Loga Bala said that new office building projects which are not for own use will not be approved. Actually, why not let the market decide? I do not think developers would want to build if they could not sell and I do not think buyers would be foolish enough to buy especially with so many reports about office oversupply. Besides, the sentiment is also negative too, compounding the effects to oversupply.

In a separate article, AllianceDBS Research said something worth reading, “While there is no property bubble for now, we do fear an oversupply of office space in Kuala Lumpur.” Bank Negara Malaysia (BNM) also recently highlighted that there is overbuilding of office space and retail malls, particularly in major cities. Yes, major cities here definitely include Kuala Lumpur. BNM said this overbuilding may impact the real estate market negatively and this may then spillover to other sectors. With a slowing Gross Domestic Product (GDP) for Malaysia to potentially just 4.4 percent for 2016 (as per IMF), it meant that the take-up rate for new office space will be subdued. BNM’s views here: BNM: Risk of oversupply is real within the next 2 years

 

After listening to so many bad news about KL’s office market, what are your thoughts? My thoughts are here: 2019 should have cheap rental for office space in KL In brief, it’s best to let the favoured ones (offices) be very competitive and for the older and less favoured ones to slowly disappear into the background. If we are indeed trying to attract even more multinationals to set up office space here, let’s give them a good deal. Office rental is often a huge chunk in terms of fixed costs and for Malaysia’s sake, the lower is definitely the better. There are today many old office buildings. Read here: Occupancy at 85 percent but 75 percent over 16 years old

My current employer is also thinking of moving next year and has recently started to look for options. Unfortunately, the options are not plenty for the size that we want versus the price that we are looking at. Let’s see if my company would get a good deal with all these oversupply news currently.

written on 18 Apr 2016

Next suggested article:  KL Office rental under threat due to over-supply

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