Despite the challenging market, it may be a good year for investment activities. According to Nawawi Tie Leung’s (NTL) Kuala Lumpur 1Q2019 report, many assets are expected to be actively transacted in the market with a more realistic price expectation on the part of owners.

This year, investment sales got off to a good start. Some eight deals valued at slightly over RM1.15 billion in total were announced in 1Q2019, a substantial increase from RM250 million in 1Q2018.

The biggest deal was the sale and leaseback of the Sunway University campus and its related facilities in Bandar Sunway by Sunway’s educational arm, Sunway Destiny Sdn Bhd, at RM550 million with an estimated yield of 7%, says NTL.

Meanwhile, Lembaga Tabung Haji is in an off-market deal with a Ministry of Finance entity to offload

RM6 billion worth of assets, which will be transferred into a special purpose vehicle. Khazanah Nasional Bhd, under the direction of its new board, is said to be considering divesting its Legoland theme park in Iskandar Malaysia at an indicative price of RM1 billion as well as its Singapore assets developed in a government-to government deal as part of the KTM rail land resolution in Singapore.

The Employees Provident Fund has sold Wisma KFC to Singapore-based property developer Royal Group for a reported RM130 million and is actively seeking buyers for assets such as Avillion Hotel in Port Dickson. NTL has brokered the sale of Boustead Holdings Bhd’s four-star Royale Chulan Bintang Hotel in Bukit Bintang to Singapore Hotel Royal Ltd for RM197 million in an open tender.

The other prominent deal was the sale of Malaysia Pacific Corp’s (MPC) Menara MPL in Jalan Raja Chulan, Kuala Lumpur, to Asia New Venture Capital Holding for RM189 million or RM644 psf. “As part of its restructuring process, MPC and its financier via several auction attempts have been trying to secure a buyer for this stratified asset for some years without success,” says NTL.

Other properties for sale include the newly completed Menara Celcom and a few hotels around the country.

The struggle continues

With the oversupply of new buildings in a subdued market, the office market continues to struggle.

“Ample availability of office space will push rents down. However, prime office buildings will continue to maintain their rental rates,” says NTL.

According to NTL, total office stock in Kuala Lumpur remained stable at 81.8 million sq ft in 1Q2019, with no new supply. However, it notes that there will be about 3.8 million sq ft of new office space coming onstream this year, all within the Golden Triangle. The Exchange 106 in Tun Razak Exchange, which will supply 70% of that space, is expected to welcome its first tenant soon.

The Office Rental Index for the Golden Triangle reported a marginal increase in prime buildings to

RM7.23 psf and a drop in secondary buildings to RM5.25 psf. Meanwhile, KL Sentral continues to see high demand from multisector companies, which led to a 2.7% increase in the rental index to an average rent of RM7.10 psf. The occupancy rate of prime office buildings in KL Sentral was stable at an average 96%.

The first quarter saw the sale of the 12-storey Ikhlas Point (net lettable area of 54,046 sq ft) in The Horizon, Bangsar South, for RM46 million.

Telekom Malaysia is looking to sell its Annexe 1 and Annexe 2 buildings at its headquarters for a reserve price of RM273.4 million to RM312 million.

Meanwhile, New York-based co-working operator, WeWork, has opened its first co-working space in KL in 2Q2019. With an NLA of about 100,000 sq ft (accommodating 1,900 members), it will be the largest office in Southeast Asia.

According to NTL, WeWork plans to use its global network to collaborate with the government to help private companies in Malaysia expand globally.