Residential property overhang — defined as completed units that remain unsold nine months after launch — in Kuala Lumpur stood at 52,666 units in 2Q19.
This is a 10.9% increase from the overhang stock of 1Q19, says Nawawi Tie Leung Property Consultants in its 3Q19 report on the Malaysian capital’s real estate market.
The total overhang in 2Q19 is 32,810 residential units, 18,186 units of serviced apartments and 1,670 Soho units. The majority of the overhang units are priced between RM200,001 and RM300,000 ($65,599 and $98,902) and makes up 22.3% of the total overhang units.
For the remainder of the year, more condominium units are expected to be released into the market. In 3Q19, 2,514 units were added to the current stock after the completion of three high-rise projects. The bulk of the new supply came from 1,516 units of serviced apartments at EkoCheras, located outside the city centre at Jalan Cheras’ Mile 5. The other two completed projects are from Stonor 3 with 400 units and Aria KLCC with 598 units.
Meanwhile, prices and rents for high-end condos eased marginally by 0.8% and 2% q-o-q at RM1,028 and RM3.78 psf per month respectively.
In the office market, the total stock in Kuala Lumpur increased to 84.8 million sq ft in 3Q19, following the completion of The Exchange 106.
Average occupancy rate dropped to 77.6% in 3Q19 from 79.7% in 2Q19. Nawawi Tie attributes this to the “slower-than-expected take-up” at The Exchange 106.
The first batch of tenants are expected to move into The Exchange 106 by next month while the bulk of other tenants are expected to follow suit by March and April 2020.
In 3Q19, Kuala Lumpur’s office market was mainly driven by the expansion of serviced office/co-working space operators and tech firms such as Klook, Agoda and Fave. Expansion in the office market is expected to gather momentum as other major tech companies contemplate expanding their presence in Malaysia.
Currently, the serviced office and co-working space in KL is split between 51% and 49% in the Golden Triangle and KL Fringe respectively.
Serviced office provider IWG will be opening its first Spaces co-working branch at Platinum Sentral, its largest office space in Malaysia at 59,000 sq ft.
IWG is also rebranding its Regus Centre in Menara Prestige to come under its Spaces co-working brand.
After WeWork opened its first location at Equatorial Plaza, it will set up its second location in Kuala Lumpur’s fringe area at Mercu 2, KL Eco City. Standard Chartered Bank and Mcdermott have leased 100,000 sq ft and 60,000 sq ft respectively at WeWork Equatorial Plaza.
Co-working operator Found8 from Singapore also opened its first location at KL Sentral Station in 3Q19.
In 3Q19, rents in the Golden Triangle and KL Sentral remained flat at RM7.23 psf per month and RM7.10 psf per month respectively. New supply from The Exchange 106 is expected to further contribute to the supply glut.
Menara MIDF, located along Jalan Raja Chulan, was also put up for sale at a guide price between RM140 million and RM150 million.
Looking ahead, Nawawi Tie expects office rents and occupancy to remain under downward pressure while landlords could face the continuing challenge of securing new occupiers.
In the retail sector, the overall occupancy for shopping malls in Klang Valley for 3Q19 is estimated at 85.3%. Prime malls have continued to maintain occupancy rates of above 90%. However, the projected growth of retail sales for the year has been revised downwards to 4.4% from 4.9%.
After 18 months, Parkson Puchong at M Square Mall ceased operations when the department store failed to meet its sales targets. Prior to this, Parkson had operated at Suria KLCC mall for 20 years. The group currently operates 43 stores across Malaysia.
Fitness gym Babel took up 15,000 sq ft at Suria KLCC, leasing the rooftop space at Menara Ken TTDI.
Co-working space operators have also taken up retail spaces in malls. MyTown shopping centre welcomed co-working space operator Common Ground as its tenant in September, which is taking up 18,000 sq ft of retail space across two levels. Common Ground also operates its co-working spaces in other malls such as Citta Mall and Jaya One.
In July, Malaysian co-working space operator Worq launched its third branch at KL Gateway Mall. Since opening its first branch at shopping mall Glo Damansara in 2017, Worq has rapidly expanded to provide some 18,000 sq ft of work spaces.
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