STRONG government commitment in launching mega infrastructure, housing and commercial projects and the cheaper ringgit is making Malaysia an attractive investment destination.
The unveiling of plans for projects such as Bandar Malaysia, Tun Razak Exchange, Forest City, the Mass Rapid Transit and the Refinery and Petrochemical Integrated Development in Pengerang, Johor, has sparked a flurry of interest among investors from around the world.
This, in turn, has created demand for housing and commercial space in the local market.
According to CBRE|WTW, there was observable shift in interest into assets that required minimal management, adding that the office sector was a market worth exploring in Malaysia.
CBRE|WTW said the slowdown of oil and gas industry, which was a key driver for office in Kuala Lumpur, had triggered downturn in other related industries as well.
“The implication of this is that some office buildings are being emptied. Coupled with the ongoing developments of new office buildings in the city, prices of office space will experience downward pressure.
“This presents a good opportunity for investors to acquire office property, whether for self-occupation or tenancy.
“While challenges could arise from lower rental asking price due to abundant supply, recovery in oil prices could be the tell-tale sign of improvement in business environment, which would then lead to reverse flow of office occupiers into the city centre.
“Our Market Outlook Report 2017 suggests that yield for the office sector would stabilise or compress in the long run, albeit at a slower annual rental growth. Highly-graded offices located in prime areas in Kuala Lumpur are still the recommended options for prospective investors,” said CBRE|WTW.
According to its Asia Pacific Investor Intentions Survey 2017, stronger interest was observed with investors investing in the office sector.
It highlighted that the Asia-Pacific region and some Asean countries were gaining interests as an investment destination among international investors as well as house investors.
It also showed that emerging markets in Asean were offering assets at lower prices with potential for growth in the future.
Malaysia, which had been among the main economies in Asean, should come on the scene, it said.
CBRE|WTW said economic uncertainty was still the biggest concern, slowing demand coupled with political volatility arising from Brexit and United States President Donald Trump’s administration.
However, in the context of Asia Pacific, previous concern over slowdown of Chinese economy has eased.
The 2017 Global Occupier Survey by CBRE predicts that cost would still be a major consideration in real estate decision-making.
CBRE|WTW said while there was no accurate way to measure just how much new money was being pointed at property assets regionally, allocations of funds in real estate acquisition, especially from sovereign and institutional players, still remained positive.
“Challenges remain a concern in the market, domestic and global, where the price gap between buyers and sellers will continue to hinder investment activity as landlords remain under little pressure to sell amid the low interest rate environment.
“However, there is extraordinary stability of property investment in Malaysia and the Asian region has become a focus of attention for international investors in recent years. Thus, the main barrier to foreign investment in markets like Malaysia remains that of institutional risk, maturity and transparency.”
The 2017 Global Occupier Survey, meanwhile, showed that last year the Asia Pacific commercial real estate investment market enjoyed another banner year, supported by the solid fund-raising environment and robust demand from sovereign wealth funds, pension funds and insurance companies.
Full-year transaction volume exceeded US$100 billion (RM426 billion), thanks to the record single-quarter transaction volume of US$34.9 billion in the fourth quarter of last year alone.
While the number of transactions fell to the lowest level in five years, average deal size rose by around 30 per cent year-on-year.
It was against this backdrop that CBRE Research conducted the Asia Pacific Investor Intentions Survey 2017.