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Kuala Lumpur

Office and residential sectors remain buoyant in Kuala Lumpur

Malaysia set to benefit from China’s Belt & Road initiative; retail picks up after two-year slump, according to real estate agency JLL


​KUALA LUMPUR, 10 November 2017 – Malaysia's real estate market remains positive, with the country remaining one of the prime candidates for real estate investment activity driven by sound economic growth. Malaysia's economy grew 5.7 per cent in the first half of the year, and is projected to grow between 5 and 5.5 per cent in 2018, supported by private investment and consumption.

"The country's highly educated, skilled workforce and strong economic growth of four to six per cent annually puts it ahead of more mature economies such as Australia, Japan, Singapore, Korea, Taiwan, which are all growing at one to three per cent annually," says YY Lau, Managing Director, JLL Malaysia.

Office sector: Tech companies are taking up more office space

Latest research from JLL shows that en bloc office transactions in 2017 exceeded 2016. Some major deals include Selangor Dredging Bhd selling its headquarters Wisma Selangor Dredging for RM480 million, and ARREIT purchasing Vista Tower for RM455 million.

Overall leasing demand remained stable in the third quarter of 2017, with demand coming from a diverse range of businesses including tech firms, who are taking up more office space in Kuala Lumpur. "We observed that rents are firming up due to increased confidence in the market. Those buildings positioning with MSC status are benefitting from the freeze of MSC status earlier this year," says Ms. Lau.

Residential sector: Market will stabilise and improve

Prime residential prices in Kuala Lumpur have caught up and are now on par with Jakarta and Manila five years ago. "Kuala Lumpur's residential prices are now the most compelling in Southeast Asia due to the recent weakness in the Malaysian ringgit," says Ms Veena, Associate Director, Research and Consultancy for JLL Malaysia. JLL's data indicates that the Mont Kiara/Hartamas areas fetch higher average rents with current capital values at RM764 per square foot.

"The residential market is set to stabilise and improve," says Ms Lau. "The decrease in supply in Kuala Lumpur's prime area and improvement in the economy is expected to pull capital values up for residential properties in prime areas."

Residential rents are expected to grow more moderately, given reduced tenant demand. "Tenants might consider moving beyond prime locations given new transportation lines, with expatriates still continuing to be drawn to prime locations. This balance will keep rents in prime locations stable," adds Ms Veena.

Meanwhile, non-resident foreign investors continue to purchase residential properties in Kuala Lumpur, as there are no restrictions unlike in Jakarta, where foreign buyers are restricted from buying properties. Foreign buyers are also only allowed to purchase up to 30 to 40 per cent of residential apartments in Bangkok, Ho Chi Minh City and Manila.

Retail is picking up after a two-year slump

Consumer sentiment is also turning around since the introduction of GST in 2015, which led to two years of weak retail sales. "We observed retail sales rising 11.5 per cent year-on-year in the second quarter of 2017, and we expect this improvement in sentiment is likely to be sustained," explains Ms Lau. "Retail operators are allotting more than 50 per cent of net lettable area in new shopping malls to leisure and experiential elements, such as F&B, to draw higher foot traffic. This is likely to lure millenial shoppers aged 35 and below, who form half of Malaysia's total population."

What lies ahead for Malaysia?

Malaysia is set to benefit from China's Belt & Road initiative, with multiple investment inflows to build infrastructure for logistics, transport, export and manufacturing.

"These investments will elevate Malaysia's status as the centre of Southeast Asia and attract more multinationals to set up their global headquarters in the country," concludes Ms Lau. "We're seeing renewed optimism as the business climate improves. Our outlook for the remainder of the year remains generally positive on the back of improving economic indicators and the stabilisation of oil prices."

 

About JLL

JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. A Fortune 500 company, JLL helps real estate owners, occupiers and investors achieve their business ambitions. In 2016, JLL had revenue of $6.8 billion and fee revenue of $5.8 billion and, on behalf of clients, managed 4.4 billion square feet, or 409 million square meters, and completed sales acquisitions and finance transactions of approximately $145 billion. At the end of the third quarter of 2017, JLL had nearly 300 corporate offices, operations in over 80 countries and a global workforce of over 80,000. As of September 30, 2017, LaSalle Investment Management had $59.0 billion of real estate under asset management. For further information, visit www.jll.com.

JLL has over 50 years of experience in Asia Pacific, with 36,900 employees operating in 96 offices in 16 countries across the region. The firm won the 'World's Best' and 'Best in Asia Pacific' International Property Consultancy at the International Property Awards in 2016 and was named number one real estate investment advisory firm in Asia Pacific for the sixth consecutive year by Real Capital Analytics.  www.ap.jll.com.