Occupancy hit as more offices, malls come up

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KUALA LUMPUR — The Klang Valley will have too many offices and shopping malls when they are completed in the next few years with about 18 million sq ft of space each, property consultants Rahim & Co said.

According to the property consultancy firm, the Klang Valley already had a total of 69.8 million sq ft of retail space as of last year — 32.9 million sq ft in the capital and 36.9 million sq ft in Selangor — with an average occupancy rate of 85.2
per cent.

“Another 18.2 million sq ft is expected to become available over the next four years, adding further pressure on retail mall owners.”

This is as Kuala Lumpur recorded a decline in average occupancy rates of retail space from 86.9 per cent the previous year to 84.9 per cent in the first half of last year, according to the Valuation and Property Services Department statistics cited by Rahim & Co’s annual research report, “Property Market Review 2017/ 2018”.

A total of five million sq ft of retail space was vacant in Kuala Lumpur in the first half of last year.

The average occupancy rate for malls in Selangor last year was unchanged from the previous year’s 85.4 per cent.

Rahim & Co research director Sulaiman Akhmady Mohd Saheh said there will be more competition within the retail segment over the next few years with the influx of new malls, believing the popularity of shopping online and through mobile devices will also change the industry.

“The e-commerce trend will actually force new developers, or new malls or reviving of old malls, to make them more relevant with more experiential offerings within the mall, not just a place for people to just shop.”

The total office space supply in Klang Valley is currently at 131 million sq ft, inclusive of Kuala Lumpur’s 94.1 million sq ft with an average occupancy rate of 81.4 per cent, and Selangor’s 36.9 million sq ft with average occupancy rate of
74.7 per cent.

“With the incoming supply of 18 to 20 million sq ft estimated to enter the market in the next few years, continued pressure will be seen on the occupancy rates and effective rental rates,” it said, noting offices in integrated developments with good transport connectivity will remain attractive for companies seeking to rent.

Executive chairman of Rahim & Co, Tan Sri Abdul Rahim Abdul Rahman said property developers should not consider both the current and future market conditions when deciding if it was feasible to build a project.

“Absorption traditionally is two to three million sq ft of office space (per annum), but when we have 18 million square feet coming in the market within the next three years, it means there will be a lot of pressure… that’s part and parcel of the property development game,” he said.