A glut of office space could worsen when banks end the moratorium on loan repayments, according to a real estate company and a think tank.
Henry Butcher Malaysia says the outlook for the office sector in the near future would still be challenging, especially after the end of the loan moratorium.
“More businesses could close unless the government comes up with additional support measures for the business community, and this could further affect demand for office space,” said the company’s COO Tang Chee Meng.
He told FMT that demand for office space had been further reduced due to business closures, staff lay-offs, postponed expansion plans, focus on flexible office space and work from home arrangements because of the Covid-19 pandemic.
According to the 2020 Property Market Report, total office space in Malaysia amounts to 17.09 million square metres, of which only 12.70 million square metres has been occupied.
Tang said the oversupply in office space could also affect rental rates.
“New buildings will not be able to achieve a satisfactory occupancy rate upon completion and the owners will have to consider offering attractive rental rates and incentives to attract tenants to fill up the space.
“Unless economic activities expand and demand for office space increases, any relocation of companies to a newly completed building could just result in an increase in unoccupied space in the building that the company moved out from.”
However, he noted that the rental index for office buildings for the second quarter of 2020 has remained relatively stable.
The Socio Economic Research Centre (SERC) said the pandemic might increase the demand for a certain type of office space.
“Businesses that moved online might still need a smaller office space for storage of their products and items. The demand for smaller office space might increase actually,” SERC executive director Lee Heng Guie told FMT.
Lee said this was the best time for those looking to rent office space. “There are a lot of choices with better rental rates.” He said the relevant authorities should play a major role in monitoring office building projects in future.
Tang said anyone intending to undertake an office building project should carry out a thorough market study first. “They should not just go ahead with the project for prestige reasons but should be very certain about the prospect of filling up the building within a reasonable time upon completion,” he said.
Approval authorities should also monitor the situation and slow down approval of new office building projects once any potential oversupply is detected, he said.
*This article first appeared on Free Malaysia Today.