Office market declines in 2019 while retail stabilises

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The overall performance of the office market was less promising in 2019, with the overall occupancy rate declining to 80.6% from 82.4% in 2018. Private office buildings recorded an average occupancy rate at 74.8%, according to the Valuation and Property Services Department of Malaysia (JPPH).

Kuala Lumpur and Penang secured a higher occupancy rate at 76.9% and 76.5% respectively, while Selangor and Johor displayed a lower percentage at 70.0% and 65.7% respectively. Further on, private office buildings in Putrajaya recorded the lowest occupancy rate at 37.6%.

In contrast, the retail sub-sector recorded a stable performance, with an overall occupancy rate of 79.2%, having decreased slightly from 79.3% in 2018. Kuala Lumpur showed an encouraging performance, securing more than 83% occupancy rate whereas Selangor slightly dropped to 82%. 

Johor and Pulau Pinang managed to secure an average occupancy of 75.3% and 73.8% respectively. However, this may change in the new future, with the high near-term downside risk resulting from the Covid-19 virus. The outbreak of the virus is projected to dampen economic growth, particularly for the first half-year of 2020.

The globally-affected outbreak is expected to take its toll on the world economies and the Malaysian economy, in particular tourism-related sectors such as airlines, retail, food and beverage and hospitality, as well as the manufacturing and selected services sector.

The magnitude of the impact on the Malaysian economy would depend on the duration and spread of the outbreak not only in Malaysia but also in other countries, especially those that are Malaysia’s major trading partners. The government has given many incentives in the effort to cushion-off the impact on the property market.

However, given the challenging market coupled with the downside in consumers and business community confidence, market activity, and market absorption are likely to be slow. Despite the economic headwinds, JPPH reports that the Malaysian property market is expected to remain resilient in the coming year.

Affordable housing and finding the right solutions to the property overhang will continue to be the main agenda of the government. The close monitoring of the implementation of programmes under the National Housing Policy 2.0 (2018 – 2025) and various incentives introduced to promote homeownership among Malaysians are expected to contain the overhang situation.

As Bank Negara Malaysia expects the Malaysian economy to rebound in 2021, in tandem with projected global recovery, the property market is anticipated to move in a similar trajectory. JPPH will continue to monitor and evaluate the expected impact of the pandemic on the Malaysian property market and provide advisory to the government in ensuring that the market remains sustainable.


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