The quantum of property investment activities in the second half of the year (H2) is likely to be slower, as investors become more risk adverse with the prospect of a slower economy, an emerging oversupply in the commercial sector and the rising cost of funds, said DTZ.

In its report on Kuala Lumpur’s property market in the second quarter of 2013 (Q2) released last week, DTZ said the conclusion of the general election (GE) in May provided greater market certainties, leading to an upturn in real estate investments in Malaysia in Q2.

“While uncertainties over the date of the GE has evidently affected the pace and negotiation of transactions in the early part of the year, the trend in H1 proved that political consideration does affect real estate investments, at least in timing over the short term.

“Now that this is over, we can expect stronger momentum in government-linked mega projects such as Tun Razak Exchange (in Kuala Lumpur) where third-party investors and developers have been invited to participate,” said DTZ.

DTZ noted that there was a strong upturn in investment activities in Q2, supported by corporate deals and asset swap as well as owner-occupiers’ deals for mid-sized and stratified offices.

The total value of 12 deals recorded in Q2 was RM988.6 million compared with RM490.8 million comprising three deals in Q1.

The global real estate adviser said office demand in Q2 was resilient, but sees oversupply in the office market persisting in the short term until “stronger demand from new growth in the business sector is demonstrably able to absorb the new completions of the coming years”.

An estimated 3.5 million sq ft of office space will be completed in 2013, with 699,000 sq ft already completed in Q1.

Significant projected completion of 4.4 milllion sq ft, 2.2 million sq ft and 1.5 million sq ft in 2014 to 2016 respectively indicate a strong and competitive supply pipeline ahead. One of the mega projects is the 118-storey Warisan Tower, which is proposed to be implemented by PNB, said DTZ.

DTZ also said average prime office rents and capital value remained stable in Q2 at RM6.15 per sq ft per month and RM838 per sq ft respectively.

Meanwhile, the Kuala Lumpur retail sector remained resilient in Q2, with an occupancy rate of 91.7%, sustained by strong domestic demand.

“The stock temporarily declined to 23 million sq ft from 23.5 million sq ft with the temporary closure of Sunway Putra Place for a major refurbishment. Only one mall, Cheras Sentral, another revived mall which was formerly known as Plaza Phoenix, will be added to the Kuala Lumpur retail stock in 2013,” it said.

On the residential market, DTZ expects more scheduled launches in H2 as developers are eager to launch previously delayed projects post-GE.

This is despite Bank Negara Malaysia (BNM) reviewing curbs on overall household lending to cool the property market as well as reduce financial risk to the banking sector.

It also observed that new residential projects were launched in Q2 in spite of possible measures by BNM to curb speculation and lending.

Q2 saw 40 units completed in the city centre compared with 1,442 units in Q1. However, about 2,704 units are expected to enter the market by year end.

“The overall average price increased by 4.3% in Q2 to RM707 per sq ft from RM678 per sq ft in the previous quarter, while average rents remained relatively stable RM3.57 per sq ft per month in Q2, a marginal drop from RM3.60 per sq ft per month in Q1, reflecting a weakening rental market.

“The increase in average price and drop in rental put an upward pressure to the rental segment,” it added.

By thesundaily.my

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