S E C T I O N 3 S T R A T E G I C P E R F O R M A N C E 59 MARKET REPORT SUMMARY 0 2.0 4.0 6.0 10% 20% 30% 40% 0% Supply (mil. sq. ft.) Vacancy Rate% 2016 2017 2018 2019 2020 2021 Total Private Space Vacancy Rate (%) 4. Office The total purpose built office (PBO) space supply in Iskandar Malaysia (IM) stood at about 6 million square feet, with 37% vacancy rate. The majority of older PBOs are well occupied by existing tenants while newer PBOs recorded a slower take up rate. Three PBO office buildings are currently under construction, which its due completion will add a net lettable area of about1.075 million square feet by 2022 The competitive landscape of PBOs has inevitably created rental competitions among older PBOs to retain tenants and newer PBOs to attract tenants. This comes in the form of among others, rental discounts, rent free periods and capital expenditure investment. Rentals have remained steady with an average gross rental for prime office space ranging from RM2.50 per square foot to RM3.50 per square foot per month for older office buildings, and RM3.50 per square foot to RM4.50 per square foot per month for newer office buildings. Most businesses are adopting the work from home (WFH) culture in response to health concerns and Standard Operating Procedures (SOPs). However, based on CBRE’s survey 1 in October 2020, more than 70% of managers preferred to have office based staff though the employees have option to work remotely. Most have returned to office aided by certainty from the positive vaccination rollout. Many businesses adopted a hybrid working model that gives employees the flexibility to work both remotely and from the office. This was also implemented as a precautionary step to face uncertainties posed by the pandemic. The hybrid business module will support the growing office space supply. Apart from that, businesses are also required to make some changes to the office layout to implement the health and safety protocols in the workplace, in accordance with the SOPs. (Extracted from CBRE/WTW Research: 2021 Real Estate Market Outlook Malaysia) 5. Industrial Iskandar Malaysia’s industrial sector continues to attract investments. Johor recorded about RM3.77 billion total approved investments in 2Q 2021, ranked 4th among the states. About 78% was domestic investments and 22% by foreign direct investment. The top 5 industry with highest approved investment in 2Q 2021 contributed 81.6% of the total approved investment . The top 5 industry were in the chemicals & chemical products, electrical & electronics, food manufacturing, machinery & equipment and plastic products industries. Total supply of industrial units in 2021 stood at 14,304 units of which 4,040 units (28.4%) are semi detached factories and 2,803 units (19.7%) are detached factories. Transaction activity recovered; volume increased 20% to 375 units in 1Q 3Q 2021 (312 units in 9M2020). The transaction value increased by 25% y o y to RM1,313 million The industrial sector was the least impacted as most operations remained open, being categorised as essential services. Operations capacity was capped at 60%. Despite that, Johor industrial sector stayed resilient. Notable Income Purpose-Built Office Buildings in 1M Development Est. NLA (sq.ft.) UMCity Premium Corporate Office 110,000 Tower, Medini Medini 10, Medini 415,000 Menara Bank Rakyat @ Coronation 550,000 Square, JBCC 1,075,000 Abbreviation : EST. - Estimated, NLA - Net Lettable Area, sq. ft. - square feet Source: CBRE, ǀ WTW Research Abbreviation : mil - million, sq. ft, - square feet Source: CBRE, ǀ WTW Research Supply And Vacancy Rate Of Privately-Owned Purpose-Built Office in 1M
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