,Tower REIT says office spaces that are cost effective will also be sought-after, as companies look at aggressive cost management to survive and rebuild.
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OVER the past few years, the Malaysian commercial property sub-sector has had to grapple with rising oversupply issues and more recently, the pandemic.
In spite of these challenges, however, many developers and players within the commercial property space are ready to tackle these hurdles head-on.
A property analyst says he expects more companies to leverage digitalisation as a means to do business.
“Owners and managers of commercial assets are also refurbishing their aging office buildings and even upgrading them with the latest technology.
“This is to ensure that they can remain competitive,” he says, adding that properties in good locations also tend to remain appealing to potential owner-occupiers and investors.
Tower Real Estate Investment Trust (Tower REIT) chairman Tang Hong Cheong says the current oversupply in the office building space, especially within the Klang Valley is expected to continue to dampen the market in the group’s current financial year ending June 30, 2022.Five-year commercial
“Under such operating conditions, Tower REIT expects revenue and income growth to be pressured in the short-to-medium term,” he says in the group’s recently released annual report.
Nevertheless, Tang says the company has taken judicious measures in the past years to enhance and refurbish its property portfolio.
He emphasises that these measures will help improve the group’s offerings to its target markets, as well as help boost its service levels and cost efficiencies.
“The post-pandemic operating conditions will be challenging and the management will step up its efforts to fortify its competitive position. We are committed to create value with a view to maximise returns. Tower REIT will continue to seek investment opportunities that meet our objectives and yield strong returns on our investments.”
UOB Kay Hian says commercial property assets in strategic locations will continue to be resilient.
“Offices in strategic locations will continue to be resilient as evidenced by KLCC Stapled Group and Sentral REIT’s steady earnings throughout the pandemic. However, average rental rates in the Kuala Lumpur City Centre continue to remain under pressure at RM6.90 per sq ft.”
Although the industry is still grappling with oversupply, the research house says selected office REITs (located in strategic locations with good connectivity like KL Sentral) will benefit from higher demand, amid the need for physical distancing.“Moreover, the average rental rates in KL Sentral are attractive at RM6.46 per sq ft,” it says.