By IZZAT RATNA / Pic By MUHD AMIN NAHARUL
Unoccupied office space in the Klang Valley is expected to balloon further with about five million sq ft of business areas or the size of 1,780 tennis courts to enter the market annually in the next four years.
Savills (M) Sdn Bhd executive chairman Datuk Christopher Boyd said the Klang Valley’s total office space alone is already sizeable, measuring 120 million sq ft presently.
He said despite signs of commercial glut in certain areas, office rentals have remained stable and are not expected to reach a “any life threatening” crisis anytime soon.
“Tenants in well-established older buildings can move to newer spaces and take advantage of better quality and higher specifications office buildings without paying higher rents,” he said in Kuala Lumpur yesterday.
“At the same time, some of the older buildings that are more than 30 years old are already reaching a stage where they are ripe for development and renewal process.”
Boyd said the office market would remain competitive, but rentals have remained pretty stable despite the overall average vacancy rate of office spaces in the Klang Valley hovering around 20%.
In the last few years, uncontrolled construction of office towers have created excess in the commercial space.
The situation is further depressed with the oil and gas rout, forcing many companies to either close their offices or rent smaller spaces as staff count shrink.
The property consulting firm said Malaysia has emerged as the preferred destination for international brands in South-East Asia to penetrate the retail scene.
Savills deputy executive chairman Allan Soo said international brands are able to expand at a faster rate in Malaysia, especially in the Klang Valley with more than 10 shops in a very short space of time compared to other cities in the region.
“Hence, this makes the distribution process more convenient, which creates a more tenant friendly rental market,” he said.
However, Soo pointed out that retailers are being cautious in occupying new spaces.
He said there has been consistent decline in rental rents over the last few years with more new malls entering the market at lower rates, impacting the provision of capital expenditure of landlords to some of the more desirable brands.
“But for the more established malls, rentals continue to rise. This indicates that there is an imbalance, whereby, new malls are beginning to compete very strongly for tenants; hence, they have reduced their asking rents.
“The average occupancy rate for malls in strategic locations is between 90% and 100%, while those in decentralised areas are struggling at below 60%,” he added.
On the commercial glut, Soo said the stringent measures imposed by the authorities and financial institutions would neutralise the construction and overbuilding of new shopping malls.
“There are still a few malls currently undergoing construction to enter the market over the next few years and there would be some increase in supply.
“However, the market has also rationalised and consolidated. Many retailers are very unwilling to take on new spaces without extensive market feasibility studies, which indicates that the market is adjusting and correcting itself,” he said.