Penang, Sabah picked as top investment regions for leisure/hotel sub-sector

PETALING JAYA (Feb 21): Penang and Sabah remain the most attractive regions for investment in the hotel or leisure sub-sector, according to respondents of Knight Frank’s Malaysia “Commercial Real Estate Investment Sentiment Survey 2017” (CREISS).

“Looking into the most attractive regions for investments in 2017, Sabah and Penang were voted as the most attractive regions for hotel or leisure investment.

“[Also], the attractiveness of investing in the hotel or leisure sub-sector leapt from 65% in 2016 to 93% in 2017,” said the survey.

The survey had gathered responses from property developers (77%), fund or real estate investment trust (REIT) managers (16%) and lenders (7%).

Knight Frank also noted that industry players expected the hotel or leisure sub-sector to remain resilient in 2017, while 53% expected the average room rate to remain steady this year.

More than half (56%) of the respondents thought that the yield performance of the hotel or leisure sub-sector will be stagnant for 2017

Meanwhile, Kuala Lumpur will continue to be the focus of investments in the office and retail sectors.

“Despite the challenges in the office and retail markets, 12% of the respondents continue to see potential for office investments in Kuala Lumpur while 20% think there is a potential in the retail sector in Johor,” said Knight Frank on the findings.

According to the survey, respondents were not satisfied with the performance of the office and retail sub-sectors in 2016 and expected the outlook to remain cloudy in 2017.

Meanwhile, majority of the respondents said the capital values for the office and retail sub-sectors will hold steady, with more than half of them expecting both sub-sectors to remain stagnant this year.

Slightly more than half of the respondents thought rental values for the office (56%) and retail (54%) sub-sectors will decrease while 64% (office) and 59% (retail) of the respondents expected occupancy rates for these sub-sectors to decrease.

On yield performance, 55% and 42% of the respondents expected yield compression in the retail and office sub-sectors respectively.