Covid 19: Impact on Office/Factory Rents
The covid-19 pandemic has had a sudden impact on business owners, and also commercial tenants. What are some of the impacts on office rents during this tough time?
According to PropertyGuru, it has been reported that the Covid-19 pandemic has indeed put on added concerns and pressure to the Klang Valley’s office spaces being oversupplied. Nonetheless, the oversupply of office spaces has always been an issue for the past years, putting on pressure on the cost of rental as well.
A survey carried out by Knight Frank Malaysia, a global property consultant showed that the commercial property sector has been impacted the most by Covid-19 in 2020, followed by the nation’s economic state.
The National Property Information Centre’s (NAPIC) has reported that in Q3 2019, privately-owned purpose-built office space in Malaysia has totaled up to be 181.34 million square feet, with overall occupancy at 75.4%.
Besides, a study conducted by Jones Lang Wootton reported by The Star portrayed that the occupancy of office spaces has been dropping from 81% in 2015 to 74% in Q1 2020. Vacancies of office spaces have also risen from 20.48 million square feet to over 30 million square feet.
The pandemic “only highlighted the severity of the struggling office market”, according to Malathi Thevendran, Executive Director of Jones Lang Wootton.
“Hopefully, it will trigger some much needed government intervention by ensuring that speculative buildings are not built,” she said.
Nevertheless, Klang Valley is not the only region that is encountering this oversupply of work spaces. It has been years that the nation has been experiencing this issue now.
The issue of work spaces being oversupplied has impacted the adjustments within the office market, especially lowered rents to attract investors, and also longer rent-free periods and providing fitments for office spaces.
Even post-Covid-19, rentals of offices and factories would be put under further pressure due to the difficult business and economic state.
Executive director of capital markets of Knight Frank Malaysia, James Buckley said that it is predicted that while more vacancies will be expected and many businesses would re-let spaces, commercial rents will most likely reduce.
However, according to executive director of valuation and advisory of Knight Frank Malaysia, Keith Ooi, things would return to normal once the crisis has passed, taking into account what Malaysia has gone through during the past crises. It is required for some time to solve these issues in the property and commercial sector.