This article first appeared in The Edge Financial Daily on January 4, 2018 - January 10, 2018

KUALA LUMPUR: Optimistic about the year ahead despite a still slow property market, real estate advisory firm Savills (Malaysia) Sdn Bhd yesterday unveiled its top four property picks of 2018, including the Malaysian government’s Tun Razak Exchange (TRX) project.

Savills Malaysia managing director Datuk Paul Khong said TRX will emerge as the “most successful” commercial development in the country in 2018, followed by properties adjacent to the mass rail transit (MRT) system, logistics-related industrial properties, and retail properties.

Khong said when the firm analysed the first-decade development progress of several renowned projects in Malaysia, it found TRX will have the fastest development pace when compared with Bangsar South, Kuala Lumpur City Centre, Mid Valley City and KL Sentral.

“It had attracted international and domestic institutions in one central precinct, and many of them are not speculative, with the buyers occupying the building themselves,” he said.

On the 106-storey Signature Tower (Mulia Exchange 106) office building slated to be Malaysia’s tallest skyscraper, Khong said Savills Malaysia has learnt that the project has an asking rental rate of about RM13 per sq ft per month, excluding incentives.

“But [such information] are speculative; they (TRX master developer) haven’t made any announcement. They keep it very close to their chest. There are also fiscal and financial incentives in TRX, which would be worth an equivalent of RM2 per sq ft,” he said.

“The Signature Tower captures the top end of the office market with double-digit rentals and may not affect the general grade A offices, with rentals of RM5 to RM8 per sq ft. It (the tower) covers a specific and high-end segment of the market, where tenant profiles may differ.”

Apart from the Signature Tower, reportedly with a total lettable area of three million sq ft, Khong said the oncoming office supply would result in rentals to be relatively flat in 2018. “It will be a strong tenants’ market and landlords will be competing hard to fill their buildings.”

Khong also said the MRT system would “create a new property yardstick in 2018”, with properties increasingly assessed by their distances from MRT stations.

“The MRT is providing a credible public transportation network that is long overdue in this city. This will [place the] focus [on] demand around [MRT] stations and reshape the pattern of property values in greater KL.”

Meanwhile, Khong said logistics-related industrial properties are Savills Malaysia’s third pick for 2018 as this sector is driven by increasing e-commerce activities.

Other than land adjacent to ports and airports, Khong said certain strategic urban locations would also be highly sought after to be tenants’ sub-distribution centres.

“There will be some major acquisitions and development of logistics assets as e-commerce gathers pace, primarily with Alibaba’s move into greater KL to adopt it as its regional logistics hub.”

Savills Malaysia deputy executive chairman Allan Soo added that the Malaysian retail scene represents a “huge” opportunity for additional foreign brands to establish their presence here.

“Malaysia is likely to be the top destination for new retail brands expanding into Southeast Asia as there are less administrative procedures in Malaysia compared with other countries in this region such as Indonesia.

“Malaysia provides the best ease-of-access and the most promising demographics. In 2017, we saw the entry of new-to-market names such as Max, a highly successful fashion brand from Dubai; HLA, a high street major from China; and LC Waikiki and De Facto from Turkey. Malaysia is attractive for many reasons, and for most retailers, it is easy, transparent and geographically strategic,” he said.