Evolving workplace strategies will continue to influence spatial needs and preferences.
KUALA LUMPUR: Commercial real estate in Malaysia saw a steady recovery in the first quarter of 2023, driven by trends of sustainability and decentralisation.
Amid continued supply chain disruptions, two main drivers, namely environmental, sustainable and governance (ESG) as well as mergers and acquisition (M&A) activities, were the forces behind the increased real estate market activity, according to JLL Property Services.
Especially in the office and industrial sectors, where Multinational Companies (MNC) or Publicly Listed Companies (PLCs) hold a majority, green mandates and strict sustainability targets are increasingly becoming commonplace.
The office market had an encouraging start, with further improvements in net absorption across all submarkets, largely led by the financial services sector and owner occupancies of recently completed office buildings.
JLL reported that tenants are relocating to newer, modern and more efficient buildings as ESG takes centre stage in corporate strategy. With high supply and fierce landlord competition, office buildings in Kuala Lumpur (KL) city continue to prioritise occupancy by providing attractive incentives and benefits to remain competitive.
In comparison, there is minimal new supply of office spaces in the Greater Klang Valley, thereby demonstrating healthier performance.
Vacancy rates across KL city and the Greater Klang Valley are expected to rise following the completion of new office buildings, with an emphasis on KL city. Despite this, rentals are likely to remain stable as the lower rental rates of older buildings offset the higher rental rates of new buildings.
With the change in the nature of organisational structures and their corresponding workplace requirements, office real estate is becoming a more challenging market. Evolving workplace strategies will continue to influence spatial needs and preferences, putting new and sustainable buildings at an advantage. Tenants are as likely to relocate as they are to expand if an opportunity that meets their needs comes along.
JLL chief growth officer Christophe Vicic pointed out that when it came to assessing office space, it was increasingly common for clients to discuss workplace strategy and company culture instead of starting with square feet.
“They start with how many people they have, the way they work, how they are an open culture or closed culture. Open culture meaning no individual offices… I would say more than 50% (of our clients) start with a workplace strategy before we start identifying location,” Vicic said.
In the logistics sector, warehouse modernisation remains a running theme as the needs of users become more sophisticated.
Additionally, the need for data centre infrastructures will grow as internet usage skyrockets, allowing opportunities for the real estate market to penetrate the sector
The recent Memorandum of Understandings (MoUs) between China and Malaysia only further provides a boost to businesses covering fields such as green technology, digital economy, automotive, and electrical and electronic manufacturing.
Within the JLL report, the industrial and logistics market is one to keep an eye on as key market players have started looking at Malaysia as an investment destination when it comes to diversifying their supply chains.
In addition, the growth of eCommerce further supports the growth of the logistics market as Malaysians continue to increase their online behaviours. This will sustain a strong demand in the logistics real estate market, as well as increase the quality of warehouse stock, meaning warehouse rental rates are expected to maintain their growth trajectory.
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