Domestic News
1. KL city office occupancy continues decline in 1H2017
Occupancy rates for purpose-built offices (PBOs) in Kuala Lumpur city continued its decline to record at 80.7% in 1H2017 compared with 82.8% in 2H2016, according to property consultancy Knight Frank Malaysia in its Real Estate Highlights 1H2017. The high supply pipeline and weak demand from its traditional occupiers in the oil and gas (O&G) and banking sectors have continued to impact the office market in the city, it said.
“As for the decentralised office locations in KL fringe and Selangor, the overall occupancy rates remained fairly stable at 90.9% and 77.8% in 1H2017, supported by improved connectivity following the completion of rail infrastructure works, namely the light rail transit (LRT) extension line and Sungai Buloh-Kajang MRT (Mass Rapid Transit) Line 1,” it added.
With demand lagging behind supply, the KL and Selangor office segment is expected to remain lacklustre. As of 1H2017, the cumulative supply of PBO space in KL and Selangor stood at about 99 million sq ft.
The average rental rates in both KL city and KL fringe dipped to RM6.04 psf and RM5.69 psf, respectively, while in Selangor, the rental rate remained stable at RM4.13 psf. Despite a slow office market performance, well-located Grade-A office space in KL continued to command higher asking gross rents ranging from RM7 psf to RM15 psf per month, it noted.
“The quality of office stock continues to be upgraded to cater to the requirements of large corporates and multinational companies,” said Knight Frank Malaysia managing director Sarkunan Subramaniam.
Knight Frank noted that investment activities were fairly active in 1H2017 with several office buildings under offer and in stages of negotiation.
“Some of these older office assets offer refurbishment and redevelopment opportunities and they include Menara Prudential in KL city and Wisma MCIS and its annexe block in Petaling Jaya.
“The most anticipated property transaction for the remaining of this year is the sale of Vista Tower, the final component of The Intermark integrated development located at Jalan Tun Razak, KL.”
The 62-storey office tower offers 550,000 sq ft of net lettable area (NLA) with typical floor plate ranging from 11,000 sq ft to 11,900 sq ft. Moving forward, Sarkunan said both rental and occupancy levels will continue to be under pressure where new take-ups from O&G and banking sectors are expected to remain challenging while for IR, recruitment, e-commerce and shared services sectors, more inquires and leasing activities are expected.
However, over in Penang, Sarkunan said some buildings have achieved a slight increase in occupancy levels and rentals, which provided some comfort to an otherwise dampened property market. The occupancy rates for the four prime office buildings in George Town have improved slightly to between the range of 90% and 100%.
Similarly for the newer buildings located out of George Town, namely One Precinct, Suntech and Menara IJM Land, their average occupancy rates have also crept up slightly to 97%, up from 95% in 2H2016.
“Rentals for some of the newer office buildings have also increased; tenancies at Hunza Tower are now renewed at RM3.80 psf per month compared with RM3.50 psf per month in 2H2016. At Menara IJM Land, we understand that rentals have increased by 5%,” said Knight Frank in the report.
The existing supply of office space (10 storeys and above) on Penang island in 1H2017 stood at 5.71 million sq ft.
Office buildings under planning on Penang island include the 28-storey office tower with an NLA of 370,000 sq ft under The Light City waterfront project and Aspen Group’s planned Beacon Executive Suites, which will feature a 30-storey Small-office Home-office (SoHo) development with a total of 227 furnished executive units with standard size of 980 sq ft on the upper levels and four retail lots on the ground level.
2. Citrine Hub serviced residences at Sunway Iskandar to be handed over in October
The 328 serviced residences at Citrine Hub in Sunway Iskandar, Johor will be handed over in October this year.
Sitting on 5.22 acres of land in the Lakeview Precinct at Sunway Iskandar, Citrine Hub is a RM427 million integrated development comprising serviced residences, retail units and 168 office suites. It is the first integrated development in the 1,800-acre Sunway Iskandar.
With built-ups from 626 sq ft to 1,528 sq ft, the serviced residences are priced from RM538,200. They are 60% sold so far, while the offices have been fully taken up. The 51 boutique retail units are expected to achieve an occupancy rate of 80% by end-2017, said Sunway Bhd managing director of the property development division for Malaysia and Singapore Sarena Cheah at a media briefing on Aug 17.
Sunway Property, the developer of Sunway Iskandar, will be keeping the retail units which offer about 80,000 sq ft of retail space, said Cheah.
“As a developer, we made a strategic decision not to sell the retail units because we found that it is important to hold them as an investment and control the tenant-mix. Being the very first development in any township, it is very important that we drive traffic by putting in the necessary services and offerings,” she said.
So far, the developer has secured several tenants for the retail units, namely Jaya Grocer, Old Town White Coffee, Morganfield’s, Watsons and 7-Eleven — all the businesses will be starting by end-2017, Cheah added.
“I am very confident that by the end of the year, we will have about 80% of the retail units leased out, and that is a very good sign as [the businesses] will complement the Sunway International School and the people who are working and staying around here,” she said.
The Sunway International School is the first component completed in the Lakeview Precinct in early 2017. After eight months of opening, the school managed to attract 250 students, which exceeded the developer’s expectation.
Meanwhile, Emerald Residence — the first landed property development in Sunway Iskandar — will be completed by the fourth quarter of next year (4Q2018).
Located on 22.06 acres of land in the Lakeview Precinct, Emerald Residence is a RM350 million development with 222 units of 2-storey link houses, 2-storey superlink houses and 3-storey semi-dees with built-up sizes of 1,919 sq ft to 4,290 sq ft. Prices are from RM1.1 million onwards.
On the other hand, Sakura Residence — a pre-fabricated luxury homes development located in the Parkview Precinct — will see the completion of its 39 double-storey semi-dees and bungalows in the first phase in 1Q2018.
With a gross development value of RM250 million, Sakura Residence spans 13.02 acres and consists of 100 landed homes with built-ups from 3,190 sq ft to 3,903 sq ft. Prices start at RM2.24 million.
3. Malaysia July inflation rate seen easing to 3.3% y/y
Malaysia’s consumer price index likely rose 3.3% in July from a year earlier, a Reuters poll showed, slowing in pace for the fourth month in a row.
Higher food prices were kept in check likely by lower transport costs, as global oil prices fell, one of the economists surveyed said.
The headline inflation rate reached an eight-year high of 5.1% in March, but has since moderated.
Malaysia’s central bank has set a 2017 inflation target of 3-4%.
International News
1. ‘Extremely dissatisfied’ China blames India for border scuffle
China laid the blame at India’s door on Monday for an altercation along their border in the western Himalayas involving soldiers from both of the Asian giants.
Both countries’ troops have been embroiled in an eight-week-long standoff on the Doklam plateau in another part of the remote Himalayan region near their disputed frontier.
Last week, a source in New Delhi, who had been briefed on the military situation on the border, said soldiers foiled a bid by a group of Chinese troops to enter Indian territory in Ladakh, near Pangong lake.
Some of the Chinese soldiers carried iron rods and stones, and troops on both sides suffered minor injuries in the melee, the source said.
Chinese Foreign Ministry spokeswoman Hua Chunying said that last Tuesday, Chinese border forces were carrying out “normal” patrols on the Chinese side of the actual line of control in the Pangong lake are.
“During this time they were obstructed by Indian border forces and the Indian side took fierce actions, colliding with the Chinese personnel and having contact with their bodies, injuring the Chinese border personnel,” Hua told a daily news briefing.
What India did went against the two countries’ consensus to keep the peace on the border and it endangered the situation there, she added.
“China is extremely dissatisfied with this” and had lodged solemn representations, Hua said.
India’s Foreign Ministry has confirmed the incident in Ladakh took place but has not given any details.
Indian media have shown footage taken on a mobile phone purportedly of the scuffle, originally posted by a retired army officer, with stone throwing and shoving by soldiers of both countries.
The heighten tension on both ends of the border come ahead of a summit of the BRICS group of nations in the Chinese city of Xiamen in early September, with leaders from Brazil, Russia, India, China and South Africa due to attend.
China has repeatedly asked India to unilaterally withdraw from the Doklam area, or face the prospect of an escalation. Chinese state media have warned India of a fate worse than its crushing defeat in a brief border war in 1962.
2. China calls US intellectual property probe ‘irresponsible’
China expressed “strong dissatisfaction” on Monday with the US launch of an investigation into China’s alleged theft of US intellectual property, calling it “irresponsible”.
The US Trade Representative formally announced the investigation on Friday, a widely expected move following a call from President Donald Trump earlier last week to determine whether a probe was needed.
The investigation is the administration’s first direct measure against Chinese trade practices, which the White House and US business groups say are damaging American industry.
China’s Commerce Ministry said in a statement that the move sent the wrong signal to the world, and would be condemned by the international community.
“The United States’ disregard of World Trade Organization rules and use of domestic law to initiate a trade investigation against China is irresponsible, and its criticism of China is not objective,” an unnamed ministry spokesman said.
“China expresses strong dissatisfaction with the United States’ unilateral protectionist action. We urge the US side to respect the facts, … respect multilateral principles, and act prudently,” the official said, adding that Beijing would take “all appropriate measures, and resolutely defend China’s lawful interests”.
The United States should instead work with China to find consensus and promote healthy trade relations, the ministry said.
Section 301 of the Trade Act of 1974, a popular trade tool in the 1980s that has been rarely used in the past decade, allows the US president to unilaterally impose tariffs or other trade restrictions to protect US industries from “unfair trade practices” of foreign countries.
Beijing would almost certainly challenge any such measures at the WTO.
But China’s policy of forcing foreign companies to turn over technology to Chinese joint venture partners and failure to crack down on intellectual property theft have been longstanding problems for several US administrations.
Administration officials have said that Chinese theft could amount to as much as US$600 million, though Chinese officials deny that such forced technology transfers exist. They say the country is continuously improving intellectual property protection.
The probe will likely further complicate the US relationship with China, the country’s largest trading partner. The Trump administration has been pressing Beijing to take steps to encourage North Korea to curb its nuclear and missile programmes.
3. China’s Great Wall interested in acquiring Fiat Chrysler — Great Wall official
China’s Great Wall Motor is interested in acquiring Fiat Chrysler Automobiles (FCA), a Great Wall official told Reuters on Monday.
“With respect to this case, we currently have an intention to acquire. We are interested in (FCA),” the company official in Great Wall’s press relations department, who declined to give his name, told Reuters over phone.
Reuters reported earlier, citing sources, that Great Wall had asked for a meeting with FCA with the aim of making an offer for all or part of the Italian-American auto group.
In a separate report also published on Monday, Automotive News said that Great Wall had contacted FCA to express an interest specifically in its Jeep brand, citing an email from Great Wall President Wang Fengying.
Source: The Star & TheEdgeMarkets