The Tun Razak Exchange (TRX) is poised to be a success as there has been positive initial demand for the multi-billion ringgit development's Grade A offices, a research house said.
UOB Kay Hian said TRX's Grade A offices had attracted strong interest from multinational financial institutions which view the exchange as an avenue to set up new hubs to support future growth.
Some of the potential tenants are currently not present in Malaysia, the firm added.
"We are optimistic on the development of TRX, given its close proximity to the heart of Kuala Lumpur and the concept offered," UOB Kay Hian said, after a meeting with TRX developer 1MDB's management on the mega project.
The first phase of the sprawling financial district is due to kick off in the middle of next year, with prime Grade A office towers offering a gross floor area (GFA) of between 750,000 sq ft and 1.2 million sq ft.
The phase is estimated to generate a gross development value (GDV) of between RM5 billion and RM6 billion.
Over its 15-20 years of development, TRX is projected to generate a GDV of RM26 billion.
UOB Kay Hian said TRX will be the new international hub for finance and professional services.
It will house a right mix of government institutions, top global institutions and support services companies.
The firm said to make TRX a "work-live-and-play" area, the development also offers a retail mall with up to 1.5 million sq ft (to be done in phases) of net lettable area, residential blocks and a hotel. The development is expected to be completed by 2017.
Construction companies such as Boustead Group, WCT Bhd and Mudajaya Group are likely to be the prime beneficiaries of TRX's construction contracts.
"1MDB's management highlighted that the infrastructure cost is estimated to be RM2 billion," it noted.
Given the land has a gradient which requires a sizeable amount of earthworks, UOB Kay Hian believes the first RM1 billion will be spent on earthworks and basement works. The remaining RM1 billion will go towards external infrastructure works and rejuvenation of the surrounding areas including Jalan Imbi to enhance connectivity.
"1MDB has not decided on the source of funding as it is still deliberating on a few available options. However, a portion of this is likely to come from foreign direct investments," it added.
Property developers is expected to benefit as well because of TRX's location and connectivity.
By Business Times
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