Working from home – do we need big offices?

Rental rates will drop in the segment as companies opt for smaller space or reduce headcount


MALAYSIA’S commercial and office glut will worsen as companies, facing plummeting revenues, opt for smaller floor areas and force their employees to work from home.

Companies are already making cost-shedding their No 1 priority.

Spacious office spaces will be a thing of the past as social distancing and working from home becomes the new post-Covid-19 norms.

Millions of Malaysians have been working from home since the partial lockdown was implemented on March 18 to curb the spread of the coronavirus.

Malaysia’s capital of Kuala Lumpur has about 90 million sq ft of office space and millions more sq ft are expected to flood the market, especially with the completion of a few grade-A office structures. Rental rates will drop in the segment, which is already seeing fierce competition due to the glut.

Asiacap Valuer & Property Consultants Sdn Bhd property valuer Kit Au Yong said businesses may look into flexible working space or working with co-working space operators after the pandemic.

“Rental rates will certainly face downward pressure with decreased demand. Companies might take drastic measures in reducing headcount or delay their expansion plans.

“Landlords realistically would expect it (to be) more challenging to fill up their vacant space in the short term, which will further reduce rental rates,” he told The Malaysian Reserve.

The valuer said there are already talks of tenants asking for reprieve of rental payment.

He said for tenancies which are ending during the challenging period, there are opportunities to negotiate for a better rental rate.

CCO & Associates (KL) Sdn Bhd ED Chan Wai Seen said working from home could be a new norm post-Movement Control Order (MCO).

“(Working from home) could be an avenue for companies to reduce their operational costs with less office space and the trend may increase the vacant office areas.

“The Covid-19 pandemic will impose further downward pressure on the rental. The rates may go lower if the economy does not recover soon.”

Chan said many tenants have asked for rental rebates to stay afloat during the MCO and would seek for lower rates if the tenancies are up for renewal this year.

The MCO, which was scheduled to end today, has been extended to May 12.

The Real Estate Highlights Second Half of 2019 (2H19) by Knight Frank Malaysia showed two office buildings in Kuala Lumpur, namely TS Law Tower and Legasi Kampung Bharu, with a combined net lettable area (NLA) of around 510,000 sq ft are scheduled for completion in 2H20.

In Selangor, five buildings are expected to be completed during the same period — Block G @ Empire City, Block J @ Empire City (HCK Tower), Q Tower @ twenty- five.7, Tower 5 of PJ Sentral Garden City and i-Bhd Corporate Tower. The NLA was not stated.