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Sunday, November 23, 2008

Changing the face of Petaling Jaya

A New generation of office buildings have mushroomed in several parts of Petaling Jaya over the past few years in tandem with growing demand for better office space outside the city centre.

However, as the economy faces tough challenges in view of the current global financial crisis, the local property market has also experienced a general slowdown. The consensus among property developers is that times would be “bad” next year, although few would admit it openly.

Some developers who joined the office market craze in Petaling Jaya in the past few years may be lucky as they have managed to complete their projects and sold or tenanted out most of their office and retail spaces.

At Jaya One, residents have more choices in terms of dining and shopping.

These are the new generation strata office developments where some of them have retail components. They are mainly found along the Federal Highway (mostly purpose-built integrated offices like PJ City, PJ8) and in Section 13, 14 and 19 like Jaya 33, Jaya One, The Quill 9 and 3 Two Square.

Affluent townships like Bandar Utama and Taman Tun Dr Ismail (TTDI) are also seeing several new office projects (Menara Surian next to Ikano Power Centre and three in Bandar Utama City Centre viz Plaza IBM, KPMG Tower and 1, First Avenue. With Bandar Utama being awarded the MSC Cybercentre status in October, it would enhance the value of properties there).

Ken Group is also planning to build an office block in TTDI.

Coming up in the Kampung Kayu Area is 10 Boulevard and nearby, just after the Damansara toll plaza is the new Merchant Square.

There are many more being planned or under construction.

Those that have just been launched or just completed may face an uncertain future. This may be partly due to a softening market that is expected to get worse next year.

Although oil prices have dipped recently, there are still fears that it might jump next year, causing another round of fears and uncertainty. The global financial “tsunami” may hit our shores hard next year.

Meanwhile, a rough poll shows that generally the office market in Petaling Jaya, especially for the new developments, are holding up fairly well.

Businesses today want to be seen as progressive and not holed up in some old shop houses. They do not mind paying a premium to own or rent offices that are well located and have lots of amenities.

Chan: PJ people can now work in PJ and this has helped to reduce traffic jams.

S K Brothers Realty Sdn Bhd general manager Chan Ai Cheng points out that employees are also choosy in not only who they are working for, but also where they work, as in location.

“An interesting thing while marketing 3 Two Square is that we noticed that businesses were moving out of the older shop offices and shop houses to new developments as their former image had made it difficult for them to hire staff, much less retain them. Young graduates today are looking at working in fine offices, and places with a nice address plus extra perks. It reflects the changing times,” she says, adding that many companies who had their roots in Petaling Jaya were also reluctant to relocate elsewhere.

SK Brothers, she says, is one such company that had bought office space in 3 Two Square which is very near its former office in Paramount Garden that it had been operating since 1979.

“When we bought our office space in 3 Two Square, prices were around RM260 psf to RM280 psf but it has since gone up. We transacted a unit at 3 Two Square early this year for RM315 psf. Recently, we transacted another office space just above our unit at RM380 psf. Office rental rates there are in the region of RM2.30 to RM2.70 psf,” says the daughter of SK Brothers founder Charlie Chan.

Chan says she has a friend who bought a unit at 3 Two Square a few months before completion and managed to almost immediately rent out her unit to a pharmaceutical company; for a year now, she has been enjoying rental returns of close to 10% per annum.

Chan says her company’s decision to buy a unit in 3 Two Square was based on factors such as accessibility, matured neighbourhood, track record of the developer, ample car park bays and unique features including its wide frontage lots with a minimum of 28ft for high advertising exposures.

She said Quill 9 at Jalan Semangat which is due for completion soon has BMW as its ground floor tenant. Developed by the Quill Group, it has big floor plates of 20,000 sq ft to 50,000 sq ft with rentals from RM4.30 psf.

“All these new developments are a welcoming change for residents of Petaling Jaya. I have lived in PJ all my life and in the early days there was only Jaya Supermarket and the Right Angle in Section 14,” she adds.

“Today with Jaya One, Jaya 33 and others, residents have more choices in terms of dining and shopping, As more companies relocate their offices here, it has also enabled PJ residents to find jobs nearer their homes. PJ people can now work in PJ and this has helped to reduce traffic jams and improve people’s life,” she adds.

Instead of developing traditional type shop houses, developers have differentiated themselves with new products and concepts.

For example, Jaya 33 has a hyper office concept, VSQ (pronounced as V Square) has corporate offices with serviced apartments, 3 Two Square is marketed as hybrid shop offices while Jaya One in Section 13 (along Jalan Universiti) has a mix of stand alone office block, and restaurants designed in courtyard styles.

The new projects along the Federal Highway include the newly completed PJ8, PJ City and fairly new Menara LYL.

A 6-storey office block with two basement car parks is under construction two lots from Menara LYL. These, along with Menara Axis, Crystal Plaza and the row of motor showrooms (Mercedes-Benz, Chevrolet, Mazda, Ssyangyong, VW, Naza World, Subaru and Ford on the opposite of the highway) are transforming this part of Petaling Jaya into a vibrant office cum retail hub.

By The Star (Stories by S.C.Cheah)

I-BHD Building a legacy

I-BHD executive chairman Datuk Lim Kim Hong thinks he is building an intelligent city. He is doing that and more. He is building a legacy.

Lim likens i-City to Hong Kong’s Cyberport.

Lim likens i-City to Hong Kong’s Cyberport and to Dubai’s Internet City and Media, but on a very much smaller scale. His two boys, Boon Siong, 35, and Ricky, 31, are deputy CEO and chief innovation officer respectively, are helping him.

Lim, 58, has reached a stage in his life where financial returns are no longer the main driving force. He wants to make a contribution to society. The other force driving him is his interest in technology and innovation.

Lim is not the regular entrepreneur. In the 1970s, his corporate vehicle Sumurwang introduced Dreamland brand of mattresses. Dreamland Holdings Bhd subsquently diversified into the stainless steel industry in the early 1990s and was renamed Kanzen Bhd.

Sumurwang later divested Kanzen, took an interest in Sanyo Industries Malaysia Bhd, renamed it I-Bhd and brought out a plethora of “i” brand of digital products. In 2006, I-Bhd went into the property development sector. On the unrelated nature of his past ventures, Lim says the formula remains the same.

“The word today is ‘innovation’ and because we have gone into property development, I want innovation to play a bigger role in what we put up,” he says.

When he steered the company into property development several years ago, the plan was to ultimately have two revenue streams - property development and technology - independent of each other.

Says its director Eu Hong Chew: “In about five years, property development may contribute between 60% and 70% to the group and technology the rest. One of the ways would be to offer our IT services to other developers. This will provide us with an independent IT revenue stream. The idea is to take their IT services out of i-City into other projects.

Eu says as the economy becomes more challenging, companies will look towards technology, especially IT, to help control and manage their business. “Despite the current global slowdown, our broad business direction remains relatively unchanged,” says Eu.

Like KLCC, Sentral, Mid Valley City, Bandar Utama city centre, Lim is delighted that i-City has already been given MSC Cybercentre status. Phase one, comprising about 300,000 sq ft of office space, is officially open for leasing.

Phase two with 200,000 sq ft of office space in three and five-storey units will be ready in the third quarter of next year. This will be another en bloc sale. They are in talks with investors from the Middle East, Japan, S Korea and Singapore.

“When the customer moves in, all the network, telephone infrastructure will be ready,” he says.

The entire 72 acres will take be ready in 2015 and comprises a mall with cinema facilities, several office towers and a lake of about 40 acres and park, a hotel and a small number of residential development.

Work on the mall is expected to begin in the first quarter of next year and will take three years go complete.

Eu says when i-City was planned three to four years ago, they asked themselves: What does knowledge-based office workers want? Broadband, events hall, concierge, parks and supporting amenities like food and beverage, malls and retail and a well-managed entity came into mind.

With their joint-venture partners - Sydney-based ServCorp and US-based networking equipment supplier Cisco Systems Inc among two of them - Eu and his team began to package the space accordingly.

“We are not doing a regular office commercial project, we are targeting a category of clients who like the nice perks and facilities that come with space, greenery and conveniences,” he says.

A central data centre will house the computers instead of individual companies having their own server rooms. This will be ready in the first quarter of next year. ServCorp will manage the place and Cisco, its broadband element.

There have been a lot of behind-the-scene negotiations to get the local authorities approvals for entertainment, tourism and technology elements. Incidentally, there are no cinemas, pubs or other forms of entertainment in Shah Alam due to state restrictions so i-City will certainly transform the township.

Notwithstanding the global crunch, the office environment is moving towards a greater need for conveniences, which is why ServCop and Cisco have been brought in, says Eu. When the project was first launched three years ago, the gross development value was RM1.5bil. It is estimated to exceed RM2bil today.

I-Bhd will keep between 30% and 40% of the development for recurring income and sell the rest to institutional investors. The mall, all the car parks and office towers will be kept for recurring income.

“In order to comply with MSC requirements, we have to manage the place and as such, we might as well deal with as few authorities as possible, hence, the en bloc sale. That was how it all evolved two to three years ago.

“I-City will be on a very much smaller scale compared to the international intelligent cities in Dubai and Hong Kong. As for the MSC Cybercentres in Bandar Utama, Sentral and Mid Valley, these are developments which are about 10 years old. It was only subsequently that they were given MSC status. Unlike them, we are building I-City from ground zero,” says Eu.

By The Star

Rates still attractive

Real estate agent Daniel Goh of CBD Properties is a busy man these days.

Despite all the gloom and doom about the global financial crisis and general softening market, he still sees the Petaling Jaya (PJ) office market rental rates and values holding well.

Goh is confident that more businesses will relocate to Petaling Jaya as it is more affordable than Kuala Lumpur.

“Companies are moving from the city centre to PJ, Shah Alam and Klang where the rentals are lower and also nearer to their employees’ homes,” he says, adding that during a downturn, larger companies might downsize their operations and go for smaller but modern offices; PJ has many new ones to offer.

“I just closed a deal to rent out a 6,000 sq ft office space in Jaya One in Section 13 for about RM2.50 psf inclusive of maintenance fees,” he says, adding that he had also recently done a deal to rent out a 6,400 sq ft office space in Brem Tower in Kelana Jaya for RM3 psf.

Goh has also found several tenants for Menara LYL at Jalan 51A/223 which is ideal for companies looking for bigger spaces from as low as 7,500 sq ft to an entire floor of 30,000 sq ft.

Despite the asking rent of RM4.50 psf, which is higher than the RM2.50 psf to RM3 psf in other areas, this new, modern building is almost fully occupied with tenants like Jaya Palace, McCannWorldgroup, Red Oven, Jobhunt and Standard Chartered Bank.

Office workers from Menara LYL and its adjacent Menara Axis, Crystal Plaza and some older buildings can walk to an LRT station in front of their offices.

In the 1970s, there were only a few buildings at the intersection between Jalan Utara/Jalan Barat and the Federal Highway. They include the former Jaya Puri Hotel (now called PJ Hilton) and the Asia Jaya shopping mall. Later came the Armada Hotel.

Today, this area is a hive of activities. Coming up is Malton’s VSQ office cum serviced apartment project next to the Tun Hussein Onn Hospital.

Right at the highway intersection is the newly completed RM250mil PJ8, an iconic landmark. Located on the former 3.8-acre leasehold, Cycle & Carriage showroom site opposite PJ Hilton, this L-shaped development comprises three office blocks (12, 13, 17 stories) and a 38-storey tower (tallest in PJ) with 310 serviced suites. It has 1,100 parking bays.

Developed by land owner Mega First Corp Bhd and IJM Corp Bhd, the development is set to be the latest “happening” place with a 23,000 sq ft plaza, elevated six metres above ground.

IJM Land Bhd managing director Datuk Soam Heng Choon says all three stratified office blocks had been sold (one sold en bloc) while more than 85% of the serviced apartments had also been sold, leaving only the bigger units. Mega First had also occupied substantial office space there.

He says the early batch of office suites had already appreciated in value and were now worth RM560 psf.

Contrary to talks that it might be difficult to rent out the office suites at RM4 psf to RM4.50 psf, Soam says owners had rented out many of their units, and there had been many enquiries for 20,000 sq ft to 30,000 sq ft space.

Soam says office rentals in the city were more expensive. For example, KL Sentral offices were being rented out for between RM7 psf to RM8 psf.

Kim Realty Sdn Bhd chief executive officer Vincent Ng says the new strata titled offices with security features and retail components were attracting certain companies especially small foreign firms who were image conscious.

Ng: Strata titled offices attracting small foreign firms who are image conscious.

On the office market in the Damansara area, Ng says rentals and values in Damansara Jaya were generally lower than those in SS2 and Damansara Utama commercial areas.

He says rentals for the first floor office space in Damansara Jaya was about RM1,500 to RM1,800 a month while the ground floor rentals were as low as RM3,000 to RM5,000.

The ground floor rental of SS2 ground floor shops could be as high as RM10,000 a month and the price of a shop house there were in the region of RM3.5mil to RM3.6mil.

By The Star

Downturn in Asia property marts to accelerate in 2009

HONG KONG: Asia's property markets are about to be hit by the global economic downturn with apartment prices and office rents in Hong Kong and Singapore set to skid more than 20 per cent by the end of 2009, a Reuters poll on showed yesterday.

Tokyo residential prices are forecast to fall 10 per cent by the end of next year while Grade A office rents and capital values are seen slipping by up to five per cent, according to the poll of financial institutions and property consultants.

Hong Kong residential property prices, already down 15 per cent from a peak earlier this year, are set to drop 20 per cent.

"They are heading back to levels seen during the SARs outbreak in 2003," said Leland Sun, founder of Hong Kong-based Pan Asian Mortgage Co Ltd.
"Although mortgage rates are low, at around three per cent, banks are reluctant to give 70 per cent mortgages because of declining economic conditions."

In Singapore, home prices fell 2.4 per cent in the third quarter of 2008 - marking the end of a four-year housing boom - and will drop another 21 per cent by the end of 2009.

The downturn in Asian property lags the end of the property boom in the US and Europe but will be felt more keenly next year. In comparison, Reuters polls forecast a 6.4 per cent drop in US house prices in 2009.

Hong Kong, Singapore and Japan are all now officially in recession. In Japan, more than 400 small and medium-sized developers and real estate firms have gone out of business in the past year as the residential market has turned down and as tighter credit has made it harder to finance property deals.

Office supply in Tokyo is relatively tight but rents at new buildings have started falling for the first time in six years.

Hong Kong, Asia's biggest international financial centre, will probably be most exposed to retrenchment in the financial sector. HSBC said this week it would lay off 500 staff in the city although redundancies by banks in Asia will be less than in New York or London.

As finance companies are locked into long leases, falling demand will filter through slowly, meaning further downside for office rents and prices in 2010 and possibly 2011, analysts said.

Capital values of Grade A office space in Hong Kong are poised to slump 30 per cent between while office rents are expected to tumble 26 per cent, according to the poll.

Office rents in Singapore have quadrupled in the past five years as companies expanded amid limited supply. As supply now looks to overshoot just as companies are cutting back, Grade A rents are set to drop 21 per cent by the end of 2009 and prime office capital values will slide 25 per cent.

By Reuters