AL-SALAM REIT ANNUAL REPORT 2020

47 ANNUAL REPORT 2020 MANAGEMENT DISCUSSION AND ANALYSIS OPERATIONAL REVIEW (ASSET PERFORMANCE) Office Segment - Menara KOMTAR ASSET PERFORMANCE Menara KOMTAR registered a stable performance in FY2020 on the back of strong tenants who have signed long-term leases. The performance was consistent with the overall performance of the office property segment, which was relatively resilient in FY2020. Menara KOMTAR was affected by incoming supply of new office space in Johor Bahru as well as the rise of serviced offices, co-sharing workspaces and new commercial trends. However, Al-Salām REIT is confident in Menara KOMTAR’s sustained competitive advantages including its strategic location in close proximity to the surrounding city centre, excellent connectivity and access to convenient travel and equally important, good building management and supporting services. The asset is well maintained and in good condition, which is important in attracting and retaining tenants. MAJOR ASSET ENHANCEMENT INITIATIVE No major asset enhancement initiative was undertaken in FY2020. The Fund will continue to enhance the relationships with the tenants and proactively attend to tenants’ needs and requirements. OUTLOOK AND PROSPECTS The office segment is expected to remain stable in FY2021 though downward pressures remain. Incoming supply may lead to increased competition and thus reduced rentals to retain tenants. One of the key strategies would be to approach tenants to commit to longer term leases beyond a year and the building management continues to actively engage its tenants towards this end. The Manager will also explore the commercial feasibility of remodelling some of the existing vacant office space at Menara KOMTAR into co-working/flexible workspace to capture the niche market of start-up businesses, sole proprietors, freelancers and others.