Knight Frank Ooi & Zaharin Sdn Bhd managing director Eric Ooi said in the past year, the capital values of Grade A office space had appreciated by between 20% and 30% to RM1,000-RM1,300 per sq ft. Rentals grew by 20% to 30% as well to RM7.50-RM8 per sq ft.
Meanwhile, super prime office space in the Petronas Twin Towers commands rentals of between RM10 and RM12 per sq ft.
According to Ooi, institutional buyers continue to see good upside potential in capital values and rentals of quality office buildings in Kuala Lumpur and this bodes well for the market going forward.
An analyst with a local brokerage said a lot of foreign and local institutional funds wanted to hedge against inflation and were on the lookout for strategic acquisition of prime office buildings with high yield potential.
“Property investment, especially in commercial properties, is still considered the better option for high yield potential compared with investment in the lacklustre equity market,” he said.
Axis REIT Managers Bhd chief executive officer Stewart LaBrooy said with the recent budget incentive for real estate investment trust (REIT) in the form of lower withholding tax for local and foreign investors, REIT managers would be looking at more ingenious ways to enhance their asset values by making more yield accretive purchases.
The tax rate on REIT dividend received by foreign institutional investors will be slashed to 10% from 20% while for individual investors (both foreign and local), the withholding tax will be reduced to 10% from 15%.
LaBrooy said the office market, which had made substantial gains in capital values and rentals in the past 12 months, continued to offer good upside potential.
“There is no overbuilt situation for Grade A office space in the city centre and the number of transactions at new record prices underscores the positive market sentiment,” he added.
In its latest Real Estate Highlights, Knight Frank Research said the first half of this year saw several transactions on “forward purchase” basis that recorded capital values surpassing RM1,000 per sq ft.
Kuwait Finance House (KFH) entered into an agreement with YNH Property Bhd for the purchase of half of Menara YNH along Jalan Sultan Ismail for RM920mil or about RM1,230 per sq ft.
KFH was also involved in another forward purchase agreement to buy Glomac Tower for RM576.85mil, or RM1,120 per sq ft.
The latest office building in the city to be transacted is Menara Citibank in Jalan Ampang, Kuala Lumpur. The buyer, IOI Corp Bhd, is said to have proposed a price of RM573mil or RM970 per sq ft for the building.
Another building that is believed to be up for sale is Menara Standard Chartered on Jalan Sultan Ismail, which has a price tag of close to RM300mil. The front-runner to bid for the building, which is owned by Government of Singapore Investment Corp Real Estate, is said to be ING Real Estate.
By The Star (by Angie Ng)
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