if we build office space only when we need them, it meant that supply will be coming in slower than demand. By the way, there’s no such thing as 100% occupancy rate for office space yeah. You see, if I need an office and I want it to be in the city centre for example, my choices will be far limited than if I could just take any office in any place within the whole Klang Valley.
Another scenario, if I need a huge office space for 300 people but there are only office space for 100 and 200 people instead, it does not meet my needs. When there’s very little extra, I will have to then rent two offices instead.
Yes, I have to agree that the office space in the Klang Valley today is higher than what is demanded today. I also have to agree that there are even more of these supply coming into the market and if the economy does not suddenly grow, then the demand is not likely to be coming in fast enough. So, yeah, perhaps there’s that term called excess supply of office space when we look at the overall demand versus the overall supply. The report as below:
Article in thestar.com.my According to the Valuation and Property Services Department (JPPH), the average rate of unoccupied office space in the region stood at 23.5% in the first quarter of 2019, compared with 22.6% in the first quarter of 2018.
JPPH director-general Ahmad Zailan Azizuddin said,“Kuala Lumpur and Selangor were the highest in terms of unoccupied space at 19.27 million sq ft and 11.19 million sq ft respectively.
“Our focus has always been to be watchful and prudent in allowing future commercial development such as office and retail.”
According to Savills’ Greater KL Office Market Overview First Quarter 2019 report, Asean’s largest office stock lies in Greater Kuala Lumpur, totalling 126 million sq ft. It is the second largest after Hong Kong, which has 127 million sq ft, the property. Rental wise, Hong Kong’s office rental is the highest, at US$20.58 (RM86) per sq ft and Kuala Lumpur is the most affordable, at US$1.39 (RM6) per sq ft. Singapore has 80 million sq ft of office space, Bangkok 97 million sq ft, Manila 73 million sq ft and Jakarta 67 million sq ft. The report is a comprehensive one, do refer here for the Article in thestar.com.my
What these numbers tell us is that when there are SHORTAGES in supply versus demand, the rental will go up and as for how far difference could it become, just look at Hong Kong and Kuala Lumpur. Latest numbers from Singapore? It’s S$9.93 (RM30) per sq ft. Here’s the article for reference. By the way, even Jakarta’s office rental is more than 50% more expensive than Malaysia. We should limit overbuilding, definitely. However, that definition of whether supply is too higher versus demand will have to be tweaked correctly instead of just overall number yeah. Else, we may think we have high vacancy rates but truth is, those may not be the space which the businesses want. Happy understanding.
written on 14 Aug 2019
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