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Thursday, July 29, 2010

Outlook for KL office market remains soft

PETALING JAYA: The Kuala Lumpur office market is expected to remain soft for at least the next six months, with average rental rates facing downward pressure, including for some prime office buildings, property consultants said.

DTZ Nawawi Tie Leung executive director Brian Koh said with the large incoming supply of new office space, especially in the next two years, office occupancy and rental would come under pressure until at least 2012.

“It will take sometime for the market to recover. We expect monthly average rentals in the prime office areas to ease from RM6 per sq ft now to around RM5.80 in the coming months,” he told StarBiz.

DTZ Nawawi Tie Leung, in its latest DTZ Property Times Kuala Lumpur report, said the local office market had increasingly become a tenants’ market as supply would continue to surpass demand.

“This is due to a significant increase in incoming supply later this year and over the next few years. That will allow tenants to negotiate for cheaper rates upon renewal and when signing for new leases,” it added.

By the second half of the year, another 2.06 million sq ft of new office space is scheduled to come onstream.

Between 2010 and 2014, about 14.9 million sq ft of space is in the pipeline, with about seven million sq ft scheduled for completion in 2012.

“With the significant supply of new office space coming on-stream, competition is expected to intensify further among new office buildings to secure tenants, and office rents are expected to see further downward pressure,” the report said.

It added that the outlook for the sector remained cautious, “until a more convincing and firmer economic performance is achieved”.

Although the overall occupancy rate of office buildings in Kuala Lumpur rose from 87.2% in the first quarter of this year (Q1’10) to 87.9% in Q2’10 due to a lack of new supply, the average monthly rental of office space fell from RM6.02 per sq ft (psf) in Q1’10 to RM6.00 in Q2’10.

YY Property Solutions, in association with Cushman & Wakefield, in its latest Kuala Lumpur Office Marketbeat report, said although there were more active enquiries in Q2’10 compared with the previous quarters, “the pace of demand for office space has yet to match the improved economic environment.”

“It is still largely a tenants’ market with landlords offering better terms to tenants under growing competition from existing and newly completed office buildings,” it added.

Lauding Bank Negara’s issuance of five new commercial banking licenses as “giving a boost to the office market”, it said demand for office space was essentially driven by employment generation in the services sector.

The report pointed out that the capital value of real estate in the investment market was expected to remain stable this year.

CB Richard Ellis Sdn Bhd executive director Paul Khong concurs that the market is very much a tenants’ market and rental rates are very competitive.

“Landlords need to fight harder to attract tenants and various financial incentives are now thrown in to package a deal,” he said.

However, Khong is more optimistic in his outlook of the office market and believes rentals will be stable “with some nominal increases for the rest of 2010 while occupancy rates will continue to improve slightly further.”

“Over the next six months, we expect to see further activities in the office market and more relocation of tenants to newer buildings,” he added. Khong noted that the market held on rather well in the first half of the year with areas like KL Sentral, Jalan Bangsar, Mid Valley, Damansara Heights, Petaling Jaya and Mutiara Damansara, recording a higher occupancy rate.

Monthly rentals for Grade A office space in KL’s city centre are within the range of RM6.50 to RM7 psf inclusive of service charges, at RM7.50 to RM8 psf in KLSentral, and RM5 to RM5.50 psf in Bangsar and Damansara Heights. Average office rental in Petaling Jaya is around RM4.50 psf.

By The Star (by Angie Ng)

Malaysia housing development still active

Housing development in Malaysia is still active due to the rapid growth of urbanisation and is expected to increase from 67 per cent this year to 75 per cent by 2020.

Housing and Local Government Minister Datuk Wira Chor Chee Heung said the property sector is doing well based on positive sales by property developers.

"In my own personal opinion, the industry is doing well as Malaysians have a high savings rate and are still able to purchase houses," he told reporters after officiating the 13th National Housing and Property Summit in Kuala Lumpur today.

The summit was organised by the Asian Strategy and Leadership Institute.

Chor said the growing demand for property was also in line with the rising population while prices of properties in Malaysia are still low compared to other regions.

"Hence, the attractive prices have attracted foreign investors as they believe there is still an upside in terms of returns. The number of houses is projected to increase to 8.37 million units by 2020 from 5.15 million in 2000," he added.

On whether rising property prices is healthy for the industry, Chor said the current pricing is still manageable and there was no overheating in the sector.

"The government is monitoring the (prices) every now and then. We are not reaching the stage where there is going to be overheating," he explained.

He also said Malaysia is not ready for the build and sell concept as the it has not achieved a specific level of development and is unable to emulate the advanced nations.

However, he added, the Ministry of Housing and Local Government does encourage big developers to start the concept.

"There are many developers at the top of the scale who are able to adopt the build and sell scheme, which of course, will not give rise to abandoned housing projects," he highlighted.

According to Chor, the Housing and Local Government Ministry is in the process of reviving the remaining abandoned housing schemes and will try to weed out the unscrupulous developers.

He said the government had successfully reduced abandoned housing projects to 56 this year from the 151 in 2009.

By Bernama

Ivory hopes to expand to KL soon

KUALA LUMPUR: Penang-based Ivory Properties Group Bhd, which made a strong debut on the Main Market of Bursa Malaysia yesterday, hopes to expand its operations to Kuala Lumpur in the near future, said its chairman and group chief executive officer Datuk Low Eng Hock.

Datuk Low Eng Hock (right), deputy chairman Datuk Seri Nazir Ariff (second from right) and other directors checking out the company’s debut prices yesterday.

“Our company’s strength lies in enhancing land value and maximising its return. We have been doing this in Penang for the past 10 years, and hopefully with the success of this listing we may secure deals with landowners in Kuala Lumpur soon,” said Low.

The company posted a 15 sen premium over its offer price of RM1. Afternoon trade resulted in a high of RM1.35 before it closed 15 sen higher at RM1.30, with 51 million stocks changing hands. Ivory is the first property developer to be listed on the Main Market this year.

Low said Ivory Properties was looking to secure joint ventures with other property developers.

“We have been in joint venture deals with companies from Kuala Lumpur to develop property in Penang for the past 10 years. We are currently in talks with several companies to develop more townships as well as commercial condominiums,” added Low.

At present, the company has completed property development projects with a total gross development value (GDV) of about RM675.63mil. It has ongoing projects with a GDV of about RM834.08mil scheduled for completion within the next few years. The company also has future projects worth RM1.9bil.

Project director Murly Manokharan said the property market outlook was good at present.

“In recent months, the property market has looked good not just in Penang but in the whole of Malaysia. We have recently participated in The Star Property Fair and sales results were better compared to the past two years. I would say the (property) market is on an uptrend,” said Manokharan.

By The Star

MRCB to raise RM400m for KL Sentral Park

MRCB Sentral Properties Sdn Bhd, a unit of Malaysian Resources Corp Bhd (MRCB), will raise RM400 million of debt to finance the development of its latest project called KL Sentral Park.

The commercial paper/medium term notes (CP/MTN) programme is arranged by Affin Investment Bank Bhd.

"The financing, which is being guaranteed by Danajamin Nasional Bhd, is for a period of seven years," said MRCB chief executive officer Mohamed Razeek Hussain.

KL Sentral Park comprises five blocks of office buildings, high-end retail shops, business centres and green spaces with a net lettable area of 518,000sq ft. So far, 18 per cent of the project has been completed.
Speaking to reporters after the signing ceremony between MRCB, Affin Investment and Danajamin in Kuala Lumpur yesterday, Mohamed Razeek said construction started in the fourth of quarter of 2009.

"The project is scheduled to be completed next year," he said.

MRCB had executed a 15-year lease agreement with SME Corp and recently obtained a commitment to lease for 15 years by SBM (Malaysia) Sdn Bhd.

"Collectively, this translates to occupancy reaching 60 per cent of KL Sentral Park's net lettable area," he said.

Also present were Affin Investment managing director Maimoonah Mohamed Hussain, Danajamin chief executive officer Ahmad Zulqarnain Onn, Malaysian Trustees Bhd director Ng Hon Soon and MRCB senior vice-president of property Wong Dor Loke.

Meanwhile, Maimoonah said the domestic bond market has been dull since the subprime crisis started.

"Therefore, the guarantee provided by Danajamin to MRCB is instrumental to re-ignite interest by providing quality issuance to the market," she said.

Maimoonah said the CP/MTN programme is accorded the highest rating of MARC1 and "AAA" with the guarantee wrap from Danajamin.

This provides the most competitive pricing which lowers the company's interest costs further.

The financing for MRCB is Affin's second for the group in the last two years, the first being the RM499 million syndicated loan.

By Business Times

Viva Home to be KL's new retail landmark

The four-storey Viva Home retail mall at Jalan Loke Yew, Kuala Lumpur, is set to change Cheras' landscape and spur new developments as well as improve the experience of shopping for your home.

Viva Home is the first of its kind retail mall in Malaysia. It is a one-stop centre for home products like furniture, furnishing, home decoration and home improvement services.

The 660,000-sq-ft mall, developed by Viva Mall Sdn Bhd, a unit of Kha Seng Corp Group, is opening by the end of this year.

Besides shops catering to every inch of the home, the mall will also offer lifestyle and entertainment elements, housing anchor tenants like MBO Cinemas with nine screens and ICT Gadgets, an information and communication technology section selling computers, accessories, handheld devices and telecommunications equipment.

There will be a range of food and beverage outlets, banks, a hypermarket and an exhibition hall, showcasing the latest home and home-related products and services.

Viva Home will have lot sizes ranging from 300 sq ft to 2,000 sq ft, while anchors will have space of up to 15,000 sq ft.

All the lots are for lease, and Viva Home is currently undergoing its leasing campaign.

"As a developer, we tend to look at long-term investment ... so we will retain the lots for recurring income and manage the retail mix," Viva Mall chief executive officer Yee Ia Howe said in an interview with Business Times.

The lots will be leased from RM4 per sq ft, depending on size and location, which is the current market price, Yee said.

Viva Home is part of a RM280 million two-phase redevelopment of Plaza Uncang Emas (UE3), which Kha Seng bought last year for some RM100 million.

The old mall at UE3 is being refurbished and renamed Viva Home. The phase two of the development will boast a 260-room business-class hotel, which will sit atop the mall.

Yee said work on the hotel will start by the end of this year.

"We believe in this project. We did a lot of research on how it will work. We are improving the access to Jalan Loke Yew and Jalan Cheras and building a pedestrian bridge from the Taman Miharja light rail transit station into the mall," he said.

Yee added that there will be clear merchandising zoning to ensure identifiable retail zones and concepts to make shopping easier and comfortable.

Viva Home will also have 2,000 parking bays.

By Business Times

KYM to build up property division

INDUSTRIAL packager KYM Holdings Bhd, which owns a small property division, plans to bolster the business in a bigger way to create a new significant revenue stream.

KYM executive director Datuk Lim Kheng Yew said the company owns some 28ha of land in Teluk Rubiah, Perak, and it plans to build properties there.

"Property will be a new revenue stream for us to augment our income. We are working on that but haven't signed on anything at the moment," Lim said after its annual general meeting in Kuala Lumpur yesterday.

Lim declined to elaborate when asked if KYM plans to become a full-fledged property developer and said "We will announce our plans in the foreseeable future."
KYM made a windfall when it sold 163.6ha of its land to Brazil's Vale, an iron ore group, for RM101.9 million in June 2009. It has an option to sell another 302.4ha for RM93.8 million and this was completed in February 2010.

As a result, KYM was able to cut its debt to RM50 million from RM180 million.

KYM has also bought an additional 16ha of land in Jelapang, Perak, from Idaman Bina Makmur Sdn Bhd for RM12 million.

The company hopes to participate in Vale's downstream activities in Teluk Rubiah. This could include building properties or being a distributor for Vale.

KYM now makes and sells paper and polypropylene-based packaging products like fertiliser bags and carton packs.

By Business Times

Kha Seng does its part to transform shopping scene

The Kha Seng Group, a niche retail property developer, has taken over Plaza Uncang Emas (UE3) at Jalan Loke Yew, Kuala Lumpur, and is turning it into a prime spot for retailers and consumers.

UE3 is undergoing a massive redevelopment. The RM280 million plan includes turning the existing mall into a niche home retail mall, dubbed Viva Home, and building a multi-storey business hotel above it.

Taking over such buildings is not new to Kha Seng. In 2004, it bought Central Market, located near the Klang bus station, from Melewar Group and turned it into a vibrant culture and arts centre.

Kha Seng paid RM38 million for the building's remaining 60-year lease in an open tender by Pengurusan Danaharta Nasional Bhd.

The decision to take on the project lies in founder Bernard Bong's passion for retail. His main focus is in taking over a building and finding loopholes to meet the demand and supply of end-retail consumers.

"Central Market and Viva Home are strong concepts that can benefit from proper planning and surveying to uncover what the market really wants," he said.

"It is our commitment to develop innovative, retail properties in the Klang Valley. We find there is a demand for them. We have more projects in the pipeline," Bong said in a recent interview with Business Times.

Kha Seng is currently developing the RM1 billion Kenanga Wholesale City (KWC) in Kuala Lumpur at Jalan Kenanga, off Loke Yew, which will open by mid-2011.

The 22-level KWC, with 500,000 sq ft of net lettable space, is set to be the flagship for the Malaysian fashion wholesale industry.

The Jalan Kenanga area is the existing hub for Malaysian fashion wholesalers. Some RM1 billion revenue is generated per year and this is expected to increase by threefold after KWC opens, Bong said.

The Kha Seng Group started as a garment manufacturer and wholesaler in the 1980s. It diversified into property development and investment some 15 years ago to ride on the growing retail market.

By Business Times

MRCB will consider setting up REIT, says CEO

Mohamed Razeek Hussain exchanging documents with Maimoonah Mohamed Hussain. With them are MRCB senior vice-president and head of property Wong Dor Loke (left) and Danajamin Nasional Bhd CEO Ahmad Zulqarnain Onn.

KUALA LUMPUR: Malaysian Resources Corp Bhd (MRCB) will consider injecting some of its properties into a real estate investment trust (REIT) as part of the company’s growth strategy, said chief executive officer Mohamed Razeek Hussain.

“REIT has never been (far) away from our minds. It is a strategy that we might employ in the future, perhaps in the mid to long term.

“We are strengthening our balance sheet to enhance recurring income. When it is substantial and the time is right, we will consider,” he said after an agreement signing between MRCB and Affin Investment Bank Bhd yesterday.

Razeek was responding to a research report earlier this month that MRCB was gearing up for a REIT.

“For us, mid term would mean (within) three years and long term (is anything) beyond that,” he said.

Meanwhile, MRCB plans to raise RM400mil via a guaranteed commercial paper/medium-term note (CP/MTN) programme.

This is to finance its mixed commercial development, KL Sentral Park, which is valued at RM600mil.

MRCB Sentral Properties Sdn Bhd, a wholly-owned unit of MRCB, has appointed Affin Investment to act as principal adviser and lead arranger for the programme, which will be guaranteed by Danajamin Nasional Bhd.

The financial arrangement would come with an option of both floating and fixed interest rates, said Affin Investment managing director Maimoonah Mohamed Hussain.

“The MTN allows fixed-rate funding wherein MRCB can lock in the current low rates of interest, given the environment where interest rates are trending upwards.

“The CP, on the other hand, allows MRCB to issue short-term notes on a floating rate basis.”

Razeek said the first tranche, worth some RM50mil, would be issued “as soon as possible”. “For future tranches, it’s up to us to draw down whenever we want,” he said.

KL Sentral Park, which is about 18% completed, is scheduled for completion next year.

The project will comprise five blocks of office buildings, retail shops, business centres and green spaces with a net lettable are of about 518,000 sq ft.

By The Star

UEM Land expects average margins from Cyberjaya property launch

CYBERJAYA: UEM Land Holdings Bhd, which will launch its maiden property project in the Klang Valley this weekend, expects “mediocre margins” from the 122 units on landed strata homes offered under the first phase of its high-end residential development known as Symphony Hills in Cyberjaya.

Managing director and chief executive Datuk Wan Abdullah Wan Ibrahim said he is confident buyers would be willing to pay more for future launches at the site, once the main components of the development were completed.

“I have managed to convince the board of directors that our margins will improve to a decent level in upcoming launches after they can see what we have delivered,” he told a media preview at the site today.

A number of UEM Land’s project in Johor had already won international acclaims, and the company is setting a high target for Symphony Hills in Cyberjaya.

By The Star