Weaker demand weighs on co-working space

A reversion to conventional office is likely as hot desking and sharing of communal space may be perceived as having health risk


DEMAND for co-working space is expected to drop post-Conditional Movement Control Order as companies practise social distancing at workplaces to reduce risks from shared working areas.

Co-working spaces, which allow entrepreneurs, small and medium enterprises, and start-ups to save costs through the use of common infrastructure, have disrupted the demand for rigid office spaces.

However, real estate industry experts observed that the Covid-19 pandemic could raise the demand for office spaces as companies opt for their own confined and private working areas to avert the risk of virus transmission.

CBRE-WTW (a CBRE Group Inc and CH Williams Talhar & Wong Sdn Bhd joint venture) MD Foo Gee Jen said there could be a reversion to conventional office after this, as hot desking and sharing of communal space may be perceived as having health risk.

“This would help boost office demand for more spaces, but at a much lower rental rate due to the poor business environment,” he told The Malaysian Reserve.

He added that the greater threat to the office sector lies in the ongoing oil price war in the international market.

Foo said the oil and gas industry is one of the nuts and bolts of Malaysia’s economy. Subsequently, its downfall will certainly trigger a damaging chain reaction downstream.

Moving forward, he said the future organic growth of office demand will be minimal due to the expected economic downturn and increased remote work practice.

“The plan by the authorities to attract more multinational corporations (MNCs) to relocate their regional offices to Klang Valley is commendable, but it must be strongly supported with policy changes especially on work visa, tax relief and improvement on infrastructure,” Foo said.

VPC Realtors (JB) Sdn Bhd Asia-Pacific property consultant Bruce Lee said there is still demand or need for offices in the country.

“Oversupply of first-grade office spaces in Kuala Lumpur (KL) can only be resolved by keeping the existing and attracting more new MNCs into the city centre.

“Although the Covid-19 crisis has changed the behaviour of people to work from home, there are still of paramount importance for MNCs to maintain their corporate image and create awareness to the public of their existence in a prominent location,” he said.

The National Property Information Centre Commercial Buildings: Occupancy and Space Availability Report 2019 showed that the existing office space in the country increased to 16.98 million sq m last year, from 16.34 million sq m in 2018.

The overall occupancy rate was slightly lower at 74.8% compared to 76.8% recorded in 2018 and 78% in 2017.

As occupancy rate reduced, the availability rate increased to 25.2% with available office spaces at 4.28 million sq m, compared to 23.2% availability rate at 3.79 million sq m spaces in 2018.

On the supply side, the year witnessed 21 newly completed purpose-built offices, injecting 576,179 sq m into the market, comprising 13 private buildings and eight government buildings.

As at end-December 2019, there were 22.59 million sq m of existing office spaces from 2,549 purpose-built office buildings.

There were another 51 buildings (2.38 million sq m) in the incoming supply and 15 buildings (398,944 sq m) in the planned supply which is dominated by KL.