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Growing, good. Slowing, bad. Which is which for office rental?

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If I tell you that the property prices for the past 27 years had been rising by 6.4% per year BUT it is now rising by just 1.3% in the latest quarter, would you say that the number is bad or good? Bearing in mind that the current market condition is at best, slow. At its worst, some are saying that the demand is already lower than the supply that’s available as well as the new ones coming into the market. Please do refer to the image below for the Malaysian House Price Index (MHPI) from Bank Negara’s website: housingwatch.my

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Article in malaymail.com Knight Frank’s Asia Pacific Prime Office Rental Index has shown that the rental yields for office space here grew by just 2.1 per cent in the third quarter of 2019. This growth was 0.4 percent lower than previous quarter. As for the reason why it has risen marginally, the property consultant said that this was due to the opening of two new towers in the TRX Financial district; The Exchange 106 and Menara Prudential.

It said, “However, with Kuala Lumpur city’s overall office market still under pressure and landlords continuing to offer attractive lease packages to retain or attract tenants. The sector is expected to remain challenged in the short to medium term.” Meanwhile, prime office locations in Hong Kong has seen rental plummeting by 5.6% due to the current protests in the city. Singapore’s absolute rental yields have declined by 0.6% even though this is better than the previous quarter. Article in malaymail.com

I hope everyone understands that we continue to have more reports about the number of new offices here in Kuala Lumpur. However, at the same time, the prices continue to hold up well. This is because moving offices could not be done suddenly. Plus, for many MNCs, it’s super important to be at a location which show some class.

Sincerely speaking, if I am a working professional and the MNC who’s hiring me is operating from an old building where there’s not even a proper lobby… I will think thrice before joining. This is the reason why the numbers continue to show positive yields versus going down simply because there are more offices coming up and making the overall number swell.

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Next suggested article:  Under pressure? Yet APAC’s office rental continues to rise? Erm…

Header image photo by Cadeau Maestro from Pexels

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