Thrills and spills from the towering skyscrapers

BY ANGIE NG
angie@thestar.com.my

THE proliferation of high-rise buildings in Kuala Lumpur is changing the capital city's skyline and vistas, and the pace new buildings are cropping up can be fascinating and bewildering at the same time. On one hand, it may be a sign that our capital city remains robust and vibrant and is constantly renewing itself with new projects that will inject excitement into the property market with new buildings, designs and facades to look out for.

They will cater to the growing number of city dwellers and the working population who are taking to city living, career and recreation with gusto. Improvement in the city’s infrastructure, including the Kuala Lumpur monorail, light rail transit and mass rapid transit infrastructure that are underway, will further spruce up the connectivity and ease of travel around the city and to the suburbs.

For those who work in Kuala Lumpur, having a residence in the city makes sense as it means convenience and saving time and money to and from work. The vibrancy of the city’s gourmet scene that whips up a whole spectrum of local and international cuisines, al fresco hangouts, and a lively shopping scene with renowned local and international retail brands, are certainly contributing to Kuala Lumpur becoming a happening chill-out destination and choiced residential address once again.

Malaysian REIT Managers Association chairman Datuk Stewart Labrooy.

On the other hand, the new supply of high-rise buildings is fuelling apprehension whether the market has the capacity to absorb the additional residential and commercial property space that will come on-stream when the projects are completed, failing which the market will become saturated. A property overhang will happen when the new property supply floods the market when demand fails to keep pace with the supply. Property prices and rental rates will drop as a consequence and the market will shift into lower gear.

There is also concern whether the many high-rise buildings under construction will cause overcrowding in the city’s skyline and some quarters are calling for some form of control to ensure a more palatable skyline in Kuala Lumpur before it goes down the path of overcrowded cities.

The new high-rise buildings that are being planned around the capital city and around the fringes of the city will be gigantic towers and skyscrapers of more than 60 storeys that will dwarf over the other existing buildings.

These towering buildings with their unusual facades and aesthetic designs are expected to be sights to behold as they dazzle in the day and at night. Visitors can feast their eyes with swathes of new and old buildings of different shapes, heights, facades and functionalitties that intersperse with the other lower buildings, adding a spectrum of colours and shades to the city’s vistas.

Residential apartments, office buildings, shopping complexes and other commercial buildings are the mainstays of the city. There are quite a number of new projects, either residential, commercial or mixed developments, that are under construction.

Malaysian REIT Managers Association chairman Datuk Stewart Labrooy says Kuala Lumpur’s skyline is unique with the city being developed in stages, donning architectural styles from the 1960s through to the new green buildings of today.

“Some of these towers are getting much taller, challenging the skyline with towers of 50 floors and higher. The architectural styles are also very interesting and reflect the desires of the developers to try new styles in architecture,” he remarks.

Property consultancy VPC Alliance (KL) Sdn Bhd managing director James Wong says Kuala Lumpur’s changing skyline is a boon for the property market and the capital city. Skyscrapers with integrated developments of living, shopping and entertainment make Kuala Lumpur a more liveable city, promoting economic activities both in the day and night time, he observes.

“Notable skyscrapers in Kuala Lumpur like KL Tower and Petronas Twin Towers are iconic landmarks which add to the new identity of Kuala Lumpur, besides being tourist attractions,” Wong says.

Savills Malaysia deputy managing director Paul Khong says Kuala Lumpur has a very interesting skyline currently and the main focus is still in the KLCC vicinity with KL Sentral following closely.

“We are looking at more skyscrapers appearing in the next few years.

VPC Alliance (KL) Sdn Bhd managing director James Wong.

The new focal point in the city centre will eventually be extended and shared between KLCC and the Tun Razak Exchange (TRX) vicinity.

“The skyline in KL’s city centre will continue to grow despite the decentralisation of commercial areas which has already been effected since early 2000. Clear examples of decentralised locations include KL Sentral, Mid Valley, Damansara City and Bangsar South, all lying at the fringes of the city,” Khong says.

Hall Chadwick Asia chairman Kumar Tharmalingam says growth of the city and rising land values are responsible for the higher density as developers find that the only way to mitigate high land costs is to have high density.

“This is a similar situation in many other cities around the world. In Kuala Lumpur today, density is up to 11 times the land area and hence the new 60 and 118 storey towers under construction,” he observes.

Kumar also feels the changing skyline is a boon as people live closer to services and there is cohesive business and living environment.

“Mont Kiara is a good example. Highly dense but a community grew out of it.

Need for a balancing act
While he does not think Kuala Lumpur’s skyline is overcrowded when compared to other capital cities, Labrooy cautions the need to build rationally, emphasising that new supply should match the city’s capacity to absorb the increased capacity.

“The absorption factor needs addressing. Planners need to take a leaf from Singapore where there is a concerted effort by the city planners to match supply and demand,” Labrooy says.

Labrooy points out a pricing imbalance in the housing market that needs to be addressed, stressing that more affordable units are needed to meet demand.

“The issue today is one of affordability as many of these new developments rely on the rich investor and not the end user to make a sale happen. There is still a big demand from end users for homes priced below RM500,000,” Labrooy stresses.

He says a worrying trend is that prices of apartments are rising but rents are falling, and this will squeeze yields and the ability of investors to service their loans, unless if they have bought their property in cash.

“There will be stress on investors who bought the expensive high-end units and now have to service their loans as tenants remain in short supply,” Labrooy adds.

Wong concurs: “There is a mismatch of too many high-end residential units compared to affordable housing. This is primarily due to land price issue when land prices are too high and not economical for developers to build affordable housing in the city. The solution is for the Government to monetise Government land reserves in KL City and release such land to joint venture with developers to build affordable housing. Another solution is for the local authority, the KL City Hall, to consider increasing development density or plot ratio, so that developers can build more affordable and smaller units to increase home ownership.”

Citing market observations, he says there are more than 40 high-rise residential developments under construction in Kuala Lumpur.

The notable projects in the Kuala Lumpur City Centre (KLCC) area are Dorsett Residences, The Robertson, Tribeca, The Mews, Trillion KL, 23 Eight, The Ruma Residences, Four Seasons Place Residences, Expressionz Professional Suites, Tropicana's The Residences, Kempenski Hotel and Residences, Vortex and Manhattan Residen 61.

Savills Malaysia deputy managing director Paul Khong.

Labrooy says research by Savills Malaysia shows total existing supply of residential properties in Greater KL to be 1.83 million units, with landed property stock making up 43.5% of total stock, while non-landed represent 35.3%, and the remainder are low-cost housing.

“There will be incoming supply of 215,578 new housing units which will translate into at least 50,000 new units a year in 2015, 2016 and 2017. Checks with property websites show quite a number of residential towers coming up. They are The Dax @Kiara East comprising 274 condominiums to be completed by 2016, The NOVO @ Ampang (421 serviced apartments to be ready this year), The Astoria @ Ampang (1,216 serviced apartments by 2019), The Mark @ Cheras (467 serviced apartments by 2016), Phase 1 of 9 Seputeh (824 serviced apartments, 287 SoHos and 49 commercial lots by 2017), and KL Eco City’s Vogue Suites 1 (708 condominiums by 2017 that will be followed by another two condo towers and a serviced apartment tower).

“St Mary Residences will have three towers of 657 residential units, Crown Residences at Damansara City (370 residential suites by 2015), Centrina Service Apartments @ Sungei Besi (359 serviced apartments and 526 SoHos by 2016), 100 Residency @ Setapak (100 condos by 2016), Veo @ Desa Melawati KL (350 condos by 2016), The Manhattan @ Jalan Raja Chulan (129 residences by 2016), The Court Service Apartments @ Sungei Besi (365 service apartments by 2016), and Sentral Residences (two 55-storey towers of 752 residences by 2016).”

Khong believes market forces will determine the future supply of offices and residential units in the city. He does not think the incoming housing supply will cause a glut, noting that the property delivery system in the residential sector is still largely based on the Sell Then Build (STB) system and not Build Then Sell.

“This STB system will automatically govern supply and when demand falls, developers will revise their supply chain based on market forces. Developers will not want to dent their profit lines by reading the market erroneously,” Khong observes.

He says a lot of the unsold units in the market are due to poor market research offering wrong products in poor locations.

Khong says projects that will be closely watched include the residential strata project in TRX by LendLease called the Lifestyle Quarter. TRX is a 70-acre integrated development with a commercial mall, residential towers, hotel and office blocks offering space of about 21 million sq ft. Lendlease will lead the TRX development of the Lifestyle Quarter on the 17-acre commercial mall site, Khong says.

“We also see some new offerings, such as Wing Tai’s Le Nouvel, W Kuala Lumpur Hotel/The Residences by Tropicana and Four Seasons Place by Venus Asset, which are all super prime products lying adjacent to KLCC along Jalan Ampang,” he adds.

Khong says branded residences in the city centre or the fringe areas such as Banyan Tree, Four Seasons, Pavilion Suites KL and St Regis currently command the highest price tags in the capital city. They are moving towards the RM3,000 per sq ft price tag while the normal high-end condos in the city range from RM1,350 per sq ft.

Hall Chadwick Asia chairman Kumar Tharmalingam.

On the high-end strata residential segment, Khong says St Mary Residences, Ascott/Kirana Apartments, Marc Residences and Binjai on the Park are getting popular within the city areas.

"In the KLCC area, expatriates working around the locality are the natural tenants, while areas like Mont’Kiara and Embassy Row in Ampang also have a fair share of expatriate tenants although the number is dwindling due to a slowdown in the oil and gas sector," he adds.

New centre of gravity
A silver lining that will promote take-up rate is that city living is making a comeback in Kuala Lumpur and more people are opting to reside in the city.

Khong says convenience, proximity to the work place and other amenities, and the opportunity to enjoy a new lifestyle are among the reasons for more people choosing Kuala Lumpur as their address.

Labrooy concurs, saying the migration of new workforce living and working in the city is bringing a lot of life to the city centre, keeping it busy after working hours.

“Gen Y and Millennials (Gen Z) prefer to live and work in the city, and this is driving decisions by companies to move back to the city. New city developments with brand new buildings and amenities to cater to the younger working group are finding favour today with corporations.

“We haven’t appreciated how the Millennials will change the real estate in this country with their very different take on life. They are very much into city living with its amenities and may not even own a car, preferring to use taxis and public transport,” Labrooy notes.

Kumar says Kuala Lumpur has always been a magnet for young graduates, irrespective of where they were born or went to school.

“The belief (not unfounded) is that options for job promotions and being head hunted are always positive in the larger cities,” he says.

In the office space sector, Wong cites Napic’s Property Market Report 2014 that estimated another 25 office buildings to be completed in Kuala Lumpur by 2018. They include IB Tower, Jalan Binjai with net lettable area of 394,000 sq ft, Naza Tower @ Platinum Park (535,000 sq ft), Damansara City Pusat Bandar Damansara (756,000 sq ft), Q Sentral @ KL Sentral (1.05 million sq ft), Summer Suites/Menara Solaris (800,000 sq ft), Ken TTDI @ Taman Tun Dr Ismail (330,000 sq ft), Public Mutual Tower, Jalan Raja Chulan (215,000 sq ft), JKG Tower, Jalan Raja Laut (510,000 sq ft), KL Gateway, Bangsar South (730,000 sq ft) and The Crest, Jalan Sultan Ismail (259,400 sq ft).

Labrooy says the industry view on the office market is that there will be a sharp rise in vacancy and a softening in rents and pricing of assets, adding that for every 1% drop in occupancy, it will involve some 1,000,000 sq ft in vacancy.

“I believe the office market is headed for an oversupply situation. The current absorption of office space in Kuala Lumpur is currently mismatched to the supply that is coming onstream. These imbalances will take many years to even out.

“At a time we are constructing another 7 million sq ft of space for rent, it begs the question as to where these new customers will come from.”

He says the rush to build a raft of new buildings in the city and the suburbs will contribute to Kuala Lumpur and Greater KL having a very sizable office stock, surpassing 100 million sq ft by the end of 2015. This put Kuala Lumpur way ahead of its neighbours, Singapore with some 80 million sq ft of office space, Bangkok around 84 million sq ft, and Jakarta’s nearly 80 million sq ft.

This year, some 1 million sq ft of new office space has been completed with another 5.9 million sq ft to go in Kuala Lumpur and the Greater KL region. Of that supply, 35% will be in Kuala Lumpur’s city areas and the balance 65% will be in Kuala Lumpur’s suburban areas, which shows a shift of building activities to the suburbs.

Khong says Greater KL will see another 7.2 million sq ft office space in 2015 and 6.7 million sq ft in 2016.

“Occupancy rates are still trading steadily at about 80% to 85% averagely and with more new space coming through in the next few years, vacancy rates are expected to be on the rise again,” Khong adds.

He says among the skyscrapers appearing in the next few years include KL 118, also known as Menara Wawasan in Jalan Maharajalela, Signature Tower in TRX, possibly one more 100-storey tower in Naza’s Metropolis @ Jalan Duta, the 65-storey Four Seasons Place & Hotel in KLCC, and 83-storey Oxley Tower near the Petronas Twin Towers.

Khong observes that although the future supply of office space is quite alarming, developers, despite having received the approval for their projects in the last few years, are cautious and will only build if they have locked in any anchor tenant who has committed to taking up a big percentage of the building upfront.

“Market forces will determine the supply of high-rise developments within the city limits. In the current market conditions, we are already seeing some projects being deferred due to poor demand and speculative construction is not rampant,” Khong concludes.