Attractive rate: TRX under construction. With the various incentives and favourable tax practices given in TRX – equivalent to about RM2 psf – the effective rental is about RM11 psf.

KUALA LUMPUR: Overall office occupancy rates are dropping in the country and the vacancy rate is in the region of 20% but Tun Razak Exchange (TRX) will emerge as the most successful commercial development this year, said property consultancy Savills Malaysia.

Executive chairman Datuk Christopher Boyd said: “TRX has attracted an array of international and domestic institutions – HSBC, Prudential, Affin, Mulia and Lendlease.

“It took some time to get off the ground but now that we are in year sixth of seventh, it is clear that TRX is completing at the fastest rate over a 10-year period,” Boyd said.

He said there was a notable lack of speculative elements in TRX, as most of the buildings there are being developed by occupiers.

With the various incentives and favourable tax practices given in TRX – equivalent to about RM2 psf – the effective rental is about RM11 psf, Boyd said.

This compares with the RM13 psf sought by Menara 3 Petronas, which is part of the Petronas Twin Towers development. The Twin Towers are owner-occupied, Boyd said.

About 5 million sq ft of office space are expected to enter the market annually in the next four years. It currently totals about 120 million sq ft, most of which are in the Klang Valley.

The annual average take-up rate is about 2 million sq ft annually. However, this fell to 1.2 million sq ft in 2017 and 700,000 sq ft in 2016, due mainly to oil price drop which impacted the oil and gas sector – a dominant tenant in the capital.

Boyd expects office buildings “to take a little while to fill”.

The situation is not “life threatening,” he said.

The top-end office space includes Mulia, the Petronas Twin Towers and Menara 3, Menara Maxis and Menara 118.

In the retail sector, deputy executive chairman Allan Soo said new malls are “struggling” to fill while popular ones are raising rent.

“New malls are entering the market at lower rent while rental rate is rising in the successful ones. In that sense, there is an imbalance in the retail sector. Retailers have been reluctant to take on new space since 2015/2016,” he said.

Office and retail space are both in the commercial property segment but retail is a different animal which is highly dependent on turnover, which in turn is reliant on the number of mall goers and their purchasing power.