KUALA LUMPUR Q1 2021 Recovery hope emerged amidst continuing challenging time - Edmund Tie
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REAL ESTATE
TIMES
APRIL 2021
KUALA LUMPUR Q1 2021
Recovery hope emerged amidst continuing challenging time
ECONOMY – Vaccines rollout to lift sentiments
KEY HIGHLIGHTS
GROSS DOMESTIC PRODUCT (GDP) INFLATION
2020 2019 2020 2019
-5.6% 4.3% -1.2% 0.7%
Figure 1: Malaysia GDP Growth Figure 3: Malaysia Inflation Rate
Source: Department of Statistics Malaysia; NAWAWI TIE Research Source: Department of Statistics Malaysia; NAWAWI TIE Research
UNEMPLOYMENT RATE CSI & BCI
2020 2019 Q4 2020 Q3 2020
4.5% 3.3% 115.4 86.3
Figure 2: Malaysia Unemployment Rate Figure 4: Consumer Sentiments Index (CSI) and Business
Confidence Index (BCI)
Source: Department of Statistics Malaysia; NAWAWI TIE Research Source: Malaysia Institute of Economic Research; NAWAWI TIE Research
NAWAWI TIE RESEARCH 1MARKET COMMENTARY MARKET OUTLOOK
• Continued restrictions on mobility coupled with weak • The rollout of vaccines since February 2021 is
global economic fundamentals in the last quarter of expected to lift sentiments.
2020 resulted in the contraction of GDP by 3.4% y-o-y.
• Headline inflation is estimated to average higher
For the full year of 2020, Malaysia’s GDP contracted
driven by higher global oil prices. Bank Negara
by 5.6%. Except for manufacturing, all other sectors
Malaysia (BNM) projected the economy to remain in
recorded negative growth. The implementation of
negative growth for the first quarter of 2021.
the initiatives under the four economic stimulus
packages amounting to RM305 billion contributed to • Nevertheless, it is expected to be on a growth
the economic growth for 2020. trajectory from the second quarter onwards with
overall GDP growth of between 5.5 per cent and 6.5
• As the economy has yet to recover, in Q4 2020,
per cent.
Malaysia recorded the highest unemployment rate
since 1993 at 4.5%. • The Governor expressed that an accelerated
vaccination could potentially boost the growth up to
• The drop in CPI by 0.41% in 2020 resulted in deflation at
7.0 per cent.
1.2%, mainly contributed by the lower global oil prices.
• Business Condition Index (BCI) improved significantly
from 86.3 in Q3 2020 to 115.4 points in Q4
2020, reflecting improved confidence among the
manufacturers driven by an increase in domestic
demand and export demand. There was also a
marginal increase in capital investment due to the
expectation of better prospect of business conditions
in the coming months.
• With more positive indicators, the Malaysian economy
is expected to rebound in the first half of 2021. As
more business activities are allowed to resume,
supported by higher export demand, economists are
projecting all key economic sectors to recover in the
second quarter.
NAWAWI TIE RESEARCH 2INVESTMENT – Industrial sector continues to thrive amidst
uncertainty and volatility
KEY HIGHLIGHTS
INVESTMENT SALES (RM) Figure 5: Investment sales (RM million)
Q1 2021 Q4 2020
395 million 473.2 million
Total investment sales in Q1 2021 decreased by 16.5%
compared to Q4 2020. Major transactions noted in the
industrial sector.
Source: NAWAWI TIE Research
VALUE OF TOP 3 INVESTMENT DEALS (RM million) Table 1: Investment Sales (RM million)
Price
Property Purchaser Vendor
Q1 2021 recorded three major transactions in the (mil)
investment sales market totalling RM 395 million, a 25 Dutch Lady Milk
Dutch Lady Facility UEM Land Bhd 200
per cent increase y-o-y. Industries Bhd
FIW Steel Facility Axis REIT FIW Steel Sdn Bhd 120
Xin Hwa Trading &
Xin Hwa Facility Axis REIT 75
Transports Sdn Bhd
Investors are focusing Source: NAWAWI TIE Research
on the industrial sector
as well as land banking
for integrated mixed and
residential developments
motivated by the “new
norm lifestyle” pandemic
aftermath
NAWAWI TIE RESEARCH 3MARKET COMMENTARY MARKET OUTLOOK
• UEM Land Berhad has acquired a 9.93-acre leasehold • Based on enquiries received by NAWAWI TIE Research,
land housing the Dutch Lady Facility in Section 13, purchasers are focusing on the industrial sector for
Petaling Jaya at RM200 mill. In line with the local plan its stability as well as land banking for residential
to rejuvenate the area into a commercial hub, the land developments. Developers, such as Sime Darby, are
has potential for mixed-use development and GDV is actively expanding their portfolio in the logistics and
estimated at RM1.3 bill. industrial segments as well as lifestyle orientated
landed developments to cater to changes in lifestyle
• Axis REIT has been aggressively acquiring and had
and with the ageing of the baby boomer population.
purchased two facilities this quarter in Shah Alam
and Johor totalling RM 195 million, both sale and • Developers also continue to land bank and focus on
leaseback transactions. However, the site in Shah parcels with redevelopment potential targeted at
Alam has been identified for redevelopment. potential buyers, who have to adapt to the changing
work and lifestyle environment due to the aftermath
• The logistics sector remains resilient, LOGOs entered
of the pandemic.
into a joint venture with Global Vision Logistics Sdn
Bhd on a parcel of approximately 71 acres to develop • We anticipate there would be an slow improvement
an integrated logistics, warehousing and e-commerce in market sentiment sales with the rollout of the
hub in Shah Alam worth RM 1.5 billion. Upon Covid-19 vaccine in coming quarters.
completion, this 5 million sq. ft. project will be a major
• Foreign investors continue to be cautious as they assess
logistics hub.
the new landscape and unresolved political instability.
• Sunway Bhd had purchased a 3.34-acre parcel of land
• We expect the industrial and logistics sector to
at RM42 mill in Cheras to develop townhouses and
continue to persevere throughout the coming quarters.
larger condominium units. Located nearby Taman
Mutiara MRT station, the proposed development
is offering buyers larger units to accommodate the
“work-from-home” space requirement.
• Given the challenging market conditions, developers
have continued to creatively value-add their
developments. Gamuda has signed an MOU with 3Q
Equestrian in anticipation of growing demand for
outdoor activities, which offers a horse-riding facility
at Gamuda Gardens, located in Rawang.
• Vendors, such as EPF, begin to offload non-performing
assets in their portfolios. However, with limited
foreign buyers heightened by the country’s political
instability, there is a price mismatch between vendors
and purchasers as the search for attractive deals in the
current subdued market continue.
NAWAWI TIE RESEARCH 4OFFICE – Leasing activities remain weak,
anticipating more downsizing ahead
KEY HIGHLIGHTS
PRIME RENTAL IN GOLDEN TRIANGLE (GT) OCCUPANCY RATE OF OFFICE SPACES IN KL
Q1 2021 Q4 2020 Q1 2021 Q4 2020
RM6.95 psf RM7.05 psf 76.3% 77.3%
Figure 6: Prime & Secondary Rental Indices - KLGT Figure 8: Prime Office Occupancy (per cent
Source: NAWAWI TIE Research Source: NAWAWI TIE Research
SUPPLY
Figure 7: Completed Office Supply in KL, (sq ft,m)
Q1 2021 Q4 2020
86.3 m sq ft 85.6 m sq ft
Table 2: Upcoming Office Developments in KL
Net Lettable
Upcoming Development Location
Area (sq ft)
IQ-TRX 555,419 Golden Triangle
Affin Bank Tower TRX 576,000 Golden Triangle
TS Law Tower 362,000 Golden Triangle
Plaza One
606,000 Golden Triangle
(Lot 301, Jalan Conlay)
Bangunan MAS (PNB Lot 1194) 165,000 Golden Triangle
BBCC The Stride 394,000 Golden Triangle
Central
UOB Tower 2 185,000
Commercial Area
Source: NAWAWI TIE Research
Source: NAWAWI TIE Research
NAWAWI TIE RESEARCH 5MARKET COMMENTARY MARKET OUTLOOK
• The impact of MCO 2.0 on the construction sector was • Moving forward, the roll-out of the Covid-19
manageable and some critical construction projects vaccination programme and the launch of Malaysia’s
were exempted from stop-work orders. Permata Safe Travel portal for business travellers are expected
Sapura Tower with NLA of about 671,000 sq ft was to bring optimism to the office market.
completed at the end of March.
• However, the demand for office space is expected to
• In Q1 2021, the leasing activities in Kuala Lumpur remain soft in the short-term due to the adoption of a
(KL) were mainly dominated by technology, media hybrid working model by most of the companies.
& telecommunications (TMT) as well as shipping
• The average asking rent of the Kuala Lumpur office
& logistics. Additionally, there have been some
market in Q2 is expected to be flat.
announcements on the planned downsizing or exit of
oil & gas companies from Malaysia. This could lead to • IQ-TRX with NLA of 569,000 sqft is expected to be
a shift in the tenant mix in KLCC, where the technology completed in the second quarter of 2021.
industry would dominate the market.
• This is further supported by the launch of the
MyDIGITAL blueprint by the government. Some of the
targets are the adoption of eCommerce for 875,000
micro, small and medium enterprises (MSMEs), to
attract 2 unicorns, and to increase the number of
start-ups to 5,000. Demand for office space could be
generated from these potential tech companies and
start-ups.
• With the huge incoming supply in Golden Triangle, a
downward trend in the rental was witnessed for prime
offices, which dropped by 2% q-o-q.
• With lower-than-expected office space absorption,
downward pressure on occupancy was also observed
in KL.
• The implementation of work-from-home during the
various stages of MCO in 2020 has also halted most
of the expansion plan of flexible space operators.
Operators are relooking at location strategies and
taking necessary steps such as closing locations that
are not profitable and further delaying their new
openings. For the first three months of 2021, only a
handful of new openings were announced, including
Spaces at The Exchange 106.
NAWAWI TIE RESEARCH 6RETAIL – Optimistic recovery ahead after drastic plunge in retail sales
KEY HIGHLIGHTS
RETAIL SALES OCCUPANCY
2020 2019
-16.3% 3.7% Q1 2021 Q4 2020
85.0% 84.3%
SUPPLY
Table 3: Upcoming Retail Developments in Klang Valley
Q1 2021 Q4 2020 Upcoming Retail
Net Lettable Area (sq ft) Location
55.64 mil sq ft 55.19 mil sq ft Development
Mitsui Shopping Park
845,000 OCC
LaLaport
Figure 9: Retail Pipeline Supply (NLA) In Klang Valley Pavilion Bukit Jalil 1,800,000 OCC
(sq ft, million) Maju Thematic Mall 750,000 OCC
Datum Jelatek 319,000 OCA
KSL Esplanade Mall 700,000 OCA
Mitsui Outlet Park (Phase 3) 107,000 OCA
IOI City Mall (Phase 2) 1,000,000 OCA
Source: NAWAWI TIE Research
Source: NAWAWI TIE Research
NAWAWI TIE RESEARCH 7MARKET COMMENTARY MARKET OUTLOOK
• In Q4 2020, retail sales contracted by 19.7% y-o-y. • MCO 2.0 took another ride on retailers, affecting
Overall for 2020, retail sales recorded 22 years low, the footfall traffic of shopping malls and retail sales.
reflecting negative growth of 16.3%, heavily impacted Despite the arrival of the COVID-19 vaccine, the retail
by the COVID-19 pandemic. For 2021, Retail Group market remains uncertain due to the rebound of daily
Malaysia (RGM) projected the retail sales downwards positive COVID-19 cases.
from 4.9% to 4.1%.
• More retailers re-strategize their business by adopting
• The average occupancy of shopping malls in Klang an omnichannel strategy, providing both online and
Valley showed a slight improvement to 85% in Q1 2021. physical store experience to remain competitive
This was mainly contributed by neighbourhood malls. during this challenging period
• The only completion seen in this quarter is Setia City • With international borders still closed, it is still a
Mall (phase 2) with an NLA of 450,000 sq ft with LuLu critical situation for many retail businesses that have
Hypermarket being the anchor tenant, occupying been dependent on foreign tourists especially malls
150,000 sq ft. located in KL city centre.
• The Wage Subsidy Programme 3.0 has been extended
for another three months, allocating an additional
RM700 million for tourism, retail and wholesale trade
and businesses. The entitlement of a 10% special
electricity bill discount for shopping malls has been
extended till 30th June 2021.
• Some mall operators have taken the impact of Covid-19
on the retail market more positively by re-strategising
their malls’ positioning. For example, eCurve in Mutiara
Damansara has been closed temporarily starting from
31st March 2021 for redevelopment.
• MyTOWN will be welcoming two new lifestyle stores,
BookXcess and SSF, occupying approx. 85,000 sq ft by
end of May 2021. Don Don Donki, a famous Japanese
lifestyle store, opened its first store in Malaysia at Lot
10 and sets to open its second outlet at Tropicana
Gardens Mall by end of 2021.
• Tropicana Gardens Mall welcomed the largest Starbucks
Reserve in Malaysia, measuring more than 6,200 sq ft.
• E-commerce continues to spur in Malaysia. During
MCO 2.0, more than 550,000 units of gadgets and
900,000 home deco products were sold on Shopee.
Malaysians were seen purchasing items for home
improvement and shifting to the comfort of working
and/or studying remotely.
NAWAWI TIE RESEARCH 8RESIDENTIAL – Vaccination rollout restores market’s confidence
KEY HIGHLIGHTS
PRICE & RENTAL Figure 10: Prices and Rental Indices of High-End
Condominiums in KL
PRICE
Q1 2021 Q4 2020
-3.0% -0.2%
RENTAL
Q1 2021 Q4 2020
-3.1% -1.4%
Source: NAWAWI TIE Research
FUTURE SUPPLY
Figure 11: Future1 Supply of High-End Condominiums in KL Table 4: Upcoming High-End Condominiums in the city centre
Upcoming Development No. of Unit
8 Conlay - Tower A 564
Eaton Residences 632
The Manor 428
10 Stonor 364
NOVO Residences 421
Isola @ KLCC 140
The Colony by Infinitum 723
Quill Residences 552
Note: Source: NAWAWI TIE Research RV 26
1
Future refers to incoming and
planned supply in the city centre (CC) and
outside city centre (OCC) Source: NAWAWI TIE Research
NAWAWI TIE RESEARCH 9MARKET COMMENTARY MARKET OUTLOOK
• In Q1 2021, there were no new launches and • Expecting faster economic recovery following the
completions registered in the city centre. Moving Covid-19 vaccine rollout on Feb 24, 2021, a more
forward, about 3,820 units from nine developments positive scenario to the challenging Malaysian
are expected to enter the market in 2021. property market is anticipated, potentially in the
second half of the year.
• On q-o-q, prices and rents for high-end condominiums
remained challenging. Prices registered a decline by • The immunization programme and more relaxed
-3.0 per cent at RM939 psf, while rents dropped by movement restrictions gradually restore buyers’
-3.1 per cent at RM3.32 per sq ft/month. and investors’ confidence. Nevertheless, political
uncertainties have driven cautious property buyers
• In the challenging residential market, some attractive
and developers to reassess their plans and strategies.
offerings such as low interest rate, extended HOC
that will end on May 31, 2021, and stability during the • Evidenced by the success of HOC in accelerating sales
state of emergency poised good buying opportunities and clearing residential stock, property developers are
first-home buyers. looking forward to having HOC extended until the end
of the year.
• Home Ownership Campaign (HOC) 2020/2021 (June
2020 - Feb 2021) recorded RM25.65 billion of sales • Property overhang remained a concern, particularly
value, as compared to RM37 billion in HOC 2019 serviced apartments that made up about 73% of
(Jan - Dec 2020). About 34,354 residential units were the commercial overhang with almost 90% were
transacted and an uptick in sales is expected as more properties priced above RM500,000.
buyers conclude their purchase before the campaign
• With the various waivers introduced by the
ends in May 2021.
government, property developers are also seen
• The major sales contributed by properties priced supporting the government’s efforts to provide
between RM500,000 to RM750,000, followed by affordable housing to the M40 and B40 income groups.
properties priced from RM300,000 to RM500,000 and
RM750,000 to RM1 million. Whilst, notable demand
was seen on serviced apartments, double-storey
terrace houses and condominium/apartments.
• In the light of the current buyer’s market, property
developers are intensifying their marketing efforts to
push sales, leveraging on the HOC that will end in a
couple of months.
NAWAWI TIE RESEARCH 10DEFINITIONS
Development pipeline/ Comprises two elements:
potential supply: 1. Floor space in the course of development, defined as buildings being constructed or
comprehensively refurbished.
2. Schemes with the potential to be built in the future, having secured planning
permission/development certification.
Net absorption: The change in the total occupied or let floor space over a specified period of time, either
positive or negative.
Net supply: The change in the total floor space over a specified period of time, either positive or
negative. It excludes floor spaces that are not available for occupation due to refurbishment
or redevelopment, but includes new supply.
New supply refers to total floor space/units that are ready for occupation. Ready for
occupation means practical completion, where either the building has been issued with a
Temporary Occupation Permit (TOP) or Certificate of Completion and Compliance (CCC).
Prime office rent: The highest rent that could be achieved for a typical building/unit of the highest quality and
specification in the best location to a tenant with a good (i.e. secure) covenant.
(NB. This is a gross rent, including service charge or tax, and is based on a standard lease,
excluding exceptional deals for that particular market).
Stock: Total accommodation in the private sector both occupied and vacant:
1. Purpose-built office buildings with Net Lettable area (NLA) of at least 150,000 sq ft.
2. Purpose-leased shopping centers, excluding hypermarket and stratified retail.
3. Non-landed residential projects with at least 10 strata dwelling units.
Take-up: Floor space acquired for occupation or investment, including the following:
1. Offices let to an eventual occupier.
2. Developments pre-let or sold.
(NB. This includes subleases)
Take-up also refers to units transacted in the residential market.
Occupancy rate: Total space currently occupied or not available to let as a percentage of the total stock of
floor space (NB. This excludes shadow space which is space made available for sub-leasing).
Golden Triangle (GT) An area bordered by Jalan Tun Razak – Jalan Ampang – Jalan Maharajalela.
KL City Centre (KLCC) An area bordered by Jalan Tun Razak – Lebuhraya Sultan Iskandar – Jalan Damansara – Jalan Istana.
Outer City Centre (OCC) An area that refers to the Federal Territory of Kuala Lumpur, excluding the area of KL City Centre.
Other City Area (OCA) An area comprising the districts of Petaling, Gombak, Klang, Hulu Langat, and Sepang in
Selangor, and Federal Territory of Putrajaya.
NAWAWI TIE RESEARCH 11This page intentionally left blank. NAWAWI TIE RESEARCH 12
CONTACTS Ong Choon Fah
Chief Executive Officer
Eddy Wong
Managing Director, Malaysia
+65 6393 2318 +603 2161 7228 ext 380
choonfah.ong@etcsea.com eddy.wong@ntl.my
PROFESSIONAL SERVICES
Research & Consulting Property Management Valuation
Saleha Yusoff Azizan Bin Abdullah Daniel Ma Jen Yi
Executive Director Director Executive Director
+603 2161 7228 ext 302 +603 2161 7228 ext 311 +603 2161 7228 ext 222
saleha.yusoff@ntl.my azizan.abdullah@ntl.my daniel.ma@ntl.my
AGENCY SERVICES
Business Space/ Investment Advisory Residential Retail
Occupier Services Brian Koh Eddy Wong Ungku Suseelawati
Yasmine Mohd Zamirdin Executive Director Managing Director Executive Director
Executive Director +603 2161 7228 ext 300 +603 2161 7228 ext 380 +603 2161 7228 ext 330
+603 2161 7228 ext 288 brian.koh@ntl.my eddy.wong@ntl.my ungku.suseela@ntl.my
yasmine.zamirdin@ntl.my Chong Yen Yee
Associate Director
+603 2161 7228 ext 381
yenyee.chong@ntl.my
Authors: Brian Koh Saleha Yusoff Asha Mahalingam
Executive Director Executive Director Research Analyst
brian.koh@ntl.my saleha.yusoff@ntl.my asha.mahalingam@ntl.my
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