National Property Information Report: Developers Still Not Filling Office and Mall Vacancies Despite Adding More Last Year | Malaysia

Last year, 70,000 square meters of additional office space was built for this purpose, bringing the total to 23,969.9 million square meters (sm) from 23,179.9 million in 2020. ― Photo by Hari Anggará

KUALA LUMPUR, April 25 – Developers are still struggling to fill vacancies that have lasted for five years despite the addition of purpose-built office and retail space in 2021, according to the National Property Information report ( Napic) for this year.

Last year, 70,000 square meters of additional office space was built for this purpose, bringing the total to 23,969.9 million square meters (sm) from 23,179.9 million in 2020.

The total occupancy rate for 2021 was €18,762.0 million compared to €18,590.1 million the previous year.

Despite a slightly higher take-up rate for these offices during this period, just over 171,000 m², the total occupancy rate fell by almost 2%.

Retail space in malls reached 17,281.7 million sm last year, up from 16,853.6 million sm in 2020. Malls also saw more sellers fill up, boosting occupancy total for 2021 to 13,193.4 million sm against 13,056.4 million sm the previous year.

Yet the increases were not enough to offset the additions. The occupancy rate of commercial spaces in 2021 fell by more than 1% to 76.3 against 77.5% the previous year.

Napic’s latest data underscores warnings of a possible housing market bubble that could soon burst as developers add more supply to the glut of empty space and buildings amid stagnant demand.

Pankaj C Kumar, an investment analyst, commenting on the Napic report in his column with the English daily The Star estimated that oversupply could reach 436,000 units by 2030 with an unsold value of RM222 billion if developers continue to add more buildings to the current. Annual growth rate of 10%.

“It’s rather shocking that even at the start of 2018 market watchers came out with red flags, and today, from where we were four years ago, the market surplus in terms of volume has doubled. , while in terms of value it is up nearly 120%,” he wrote.

“An interesting fact from this data is that the overhang in the high-rise segment (which includes high-rise residential buildings, commercial service apartments and Soho units) is now at a new all-time high of 44,800. units worth approximately RM33.32 billion.”

The three subsectors account for two-thirds of the overall market surplus by volume and nearly three-quarters by total value.

The total number of units in the three segments that remained unsold and under construction in 2021 was 111,804 units worth approximately RM60.6 billion, bringing the total overhang and those in this category to 167,104 units worth approximately RM101.4 billion.

The total number of unsold and under construction units rose 10.1% to 183,918 units in just one year, according to Napic data. The total segment overhang value jumped 8.1% to RM109.7 billion.

“It only took four years for the overhang to double in the market and with the value of those under construction at 150% of the overhang,” the analyst noted.

“Simple arithmetic seems to suggest that we could see the market experiencing an unprecedented amount of unsold properties by 2030.”

For office and retail space, a five-year trend in the occupancy rate shows a marked decline. The participation rate in the first segment fell to 78.3% in 2021, from 83.3% in 2017.

Mall vacancy rates have more or less stagnated over the same five-year period, but the addition of new and often larger complexes has caused occupancy rates to drop from 81.3% in 2017 to 76.3% last year.

“As developers and financiers pour more money into development-related activities and if we see a sustained increase in unsold properties, particularly units that are completed but remain unsold, the main risk for developers is the increase inventory,” Pankaj warned.

“It will also result in developers having cash tied up in unsold properties and if their finances are not strong enough they will have to resort to more external financing, whether in the form of new equity or debt. “