AL-SALAM REIT ANNUAL REPORT 2018

AL-SALĀM REIT ANNUAL REPORT 2018 49 For 2018, the vacancy rate of retail space stayed stable at approximately 23% while the average rent eased slightly to RM25 per square foot from RM27 per square foot in 2017. With the increasing number of new modern retail malls coming into the market, the existing malls have to put on a lot more efort to stay competitive in the market. Most of the new retail malls have unique attractions and entertainment/leisure activities besides enhanced shopping experiences. All these will build up more pressure and challenges to ageing malls. 4. Office New purpose-built oice (PBO) are mushrooming in recent years, after a long hiatus since 2000s. The new oice buildings are designed with modern high technology features, which may potentially outperform the old buildings in near future. In 2018, two new oice buildings, namely the M9 at Medini and Menara JLand at Johor Bahru city centre. Injected an additional 685,450 square feet net lettable area into the market. The existing supply of PBO space in IM stand at 9.75 million square feet contributed by 110 buildings. Out of that, 77 buildings with a total of 6.96 million square feet are privately-owned while the remaining 33 buildings with a total of 2.8 million square feet are government owned. There will be approximately 2 million square feet net lettable oice space coming into the market in the next three years. Demand for oice space has been stable in Johor Bahru and vacancy rate was about 20%. The average oice rental for prime oice space in Johor Bahru city centre remained unvaried in the range of RM3.20 to RM3.50 per square foot, while the rental range was from RM2.80 to RM3.20 per square foot in the city fringe. New oice buildings in Johor Bahru city centre, Medini and Puteri Harbour commanded higher rentals of between RM4.00 to RM5.50 per square foot. The higher rates are driven by the inlux of multinational companies (MNCs) seeking high prestige New and incoming oice buildings are forming 42% of total PBO’s supply in IM. These new buildings with better quality and features, are able to achieve almost double average rental rates of old oice buildings. In order to achieve healthier occupancy rates, it is expected that new PBOs will ofer competitive leases and incentives. (Extracted from CBRE | WTW Research: Asia Market Outlook 2019 Malaysia) (Extracted from CBRE | WTW Research: Asia Market Outlook 2019 Malaysia)