One of the surest signs that Kuala Lumpur's commercial sub-sector is alive, vibrant and growing is the performance of its office rental segment.
Here, recent studies show that gross returns are currently a healthy six to 13 per cent per annum, on the back of capital values ranging from RM253psf to RM589psf. And, by the time this year is through, it's going to make the jump past the RM650psf mark, said international commercial real estate firm Cushman & Wakefield (C&W).
In its Asia Pacific Investment Report prepared by the firm in conjunction with the MIPIM Asia real estate conference and exhibition that will be held in Hong Kong next month, C&W said KL's commercial market is on the boil with several new projects taking shape both within and on the fringes of the city that are seeking to satisfy demand.
The consultancy said it also expects the retail sub-sector to continue its upward trajectory, fuelled by the strengthening ringgit, high export growth, increasing confidence in the government's administration, positive stock market performance, political stability and the country's growing number of tourist arrivals from China and the Middle East.
The tourism sector has been the second biggest foreign exchange earner since 2000, the report noted, receiving 17.55 million international travellers with receipts amounting to RM36.27 billion last year, an increase of 6.8 per cent and 13.5 per cent respectively.
In the residential sub-sector, C&W noted that activities have increased since 2002, due to pentup demand for houses following the slowdown in construction activities after the 1997 Asian financial debacle.
It said the high-end residential segment was particularly bullish, due to high levels of interest from foreign buyers, especially from the Middle East, and added that with capital values in the RM250psf to RM1,000psf band, gross returns are expected to be between six and 12 per cent.
However, C&W warned of changes to the scenario, among them the possibility of property price increases by up to 25 per cent due to inflation and the continued shortage of steel bars.
Overall, the report said the country's property market will continue trending higher, and cited the 11 government mega projects in the works worth an estimated RM90 billion as being instrumental in driving the surge.
Other catalysts include the increase in acquisitions by Real Estate Investment Trusts (REITs) and property companies, as well as steps taken by the government to expedite property purchases and to deregulate the industry.
On the state of the Asian property market, C&W describes it as "the world's most exciting today", noting that foreign investments in China are set to increase exponentially as investors begin to feel more comfortable with the republic's investment climate.
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