BY Chris Prasad
On the surface of it, things may look bleak. Yes, there has been a marked dip in transactions, a slowdown in value growth and flattening rental rates – but there is also a positive flipside to this.
Despite the economic upheaval, Kuala Lumpur remains one of the most competitive cities in the world, according to the World Economic Forum, and the current environment of low rental rates could make it an even more attractive proposition for multinationals looking to expand into the ASEAN region.
This was the opinion of investment catalyst agency InvestKL and independent global property consultancy Knight Frank at the launch of its Global Cities: The 2017 Report late last week.
As part of this latest global cities report, Knight Frank examined how much prime office space investors can acquire for US$100 million in the world’s leading cities. Across the 30 global cities analysed, KL was found to offer investors the best value, where a prime office building of over 390,000sq ft could be purchased for US$100 million (RM413.7 million).
Knight Frank Malaysia’s managing director Sarkunan Subramaniam pointed out that the key advantages of KL are that it has continued to pursue massive infrastructure advancements in spite of the economic slowdown, which means connectivity and the quality of life are improving rapidly. So too is the quality of our buildings and facilities, which boosts our overall attractiveness.
“It is important to recognise that KL also continues to offer attractive yields in prime office areas and it is the least volatile market in the Asia Pacific region, and these are strong factors investors look at,” he said.
“Coupled with the step-up on transport infrastructure development which increases the mobility and connectivity throughout Greater KL, this transformation gives KL the edge and represents the best value proposition for any multinational corporations or investors in the Asia Pacific region,” Sarkunan said, adding that our improved connectivity will prove to be a big game changer in the next six to 12 months.
Chief executive officer of InvestKL Datuk Zainal Amanshah added that the long term proposition of KL as a global city and a key investment hub remains good.
“The important thing is we are already an established hub for a number of MNCs, so our record is good and our ecosystem continues to mature in terms of facilities as well as our growing pool of talent of knowledge workers,” Zainal said.
He added that KL today has several business hubs for investors to choose from. Global multinationals are looking at the city’s fluid business ecosystem and cost-competitive factors as favourable advantages compared to other major cities in the region. The city’s competitive real estate rates, cost-effective talent and generally lower operational cost are key criteria considered.
As of 2015, InvestKL has attracted 51 MNCs with cumulative approved and committed investments of US$1.4 billion (RM5.9 billion) and created more than 7,000 high-skilled job opportunities.
While KL was ranked the cheapest city in terms of commercial real estate space, Knight Frank’s global cities report interestingly noted that three of the five costliest cities globally are in Asia Pacific, with Hong Kong boasting the highest capital values for prime central office space, followed by Tokyo in second place and Singapore in fifth.
Knight Frank Malaysia’s executive director for capital markets James Buckley said that with Malaysian real estate offering good value on a regional basis, a number of foreign investors continue to show interest in the market.
“Looking forward, the attractive yields on offer, the relative weakness of the currency and the long-term growth prospects will continue to ensure foreign interest in Malaysian real estate,” he said.