DTZ: Strong investments in 1Q for KL, but uncertainties ahead

PETALING JAYA (May 19): Despite the depreciating ringgit against the US dollar in 1Q2015 and ongoing concerns on the impact of low oil prices on the Malaysian economy, the level of investment activity remained surprisingly strong for the quarter, according to DTZ Research’s “Property Times Kuala Lumpur Q1 2015: Cautious Sentiment Aggravates Uncertainties” report.

The report however, noted that the rest of the year could see more uncertainties with greater challenges of closing the gap between asking prices and expected yields from investors, and also potential implications on investment sentiment given the current discourse on Hudud legislation.

Maintaining momentum from the previous quarter that recorded RM1.7 billion, the total investment sales volume in Malaysia for 1Q was estimated at RM1.6 billion.

Nine transactions were recorded for the quarter, with major deals including the long-delayed Bukit Bintang City Centre project at Jalan Pudu/Jalan Hang Tuah that has started with a new joint-venture agreement between UDA Holdings Bhd (the original developer) with Eco World Development Group Bhd and the Employees Provident Fund Board (EPF).

Another major transaction reflecting the strength of the market is the sale of the French Embassy site on Jalan Ampang that has been successfully signed off at a still undisclosed price, the report said. (The site has since been sold to Putrajaya Ventures Sdn Bhd, a subsidiary of Putrajaya Holdings Sdn Bhd).

Meanwhile, other significant deals include Tropicana Mall and Office (RM540 million) that was sold to CapitaMall Malaysia Trust,  Subang Avenue Shopping Centre at RM139.5 million, Doubletree by Hilton at The Intermark at RM388 million, and The Integra Tower sale, which was reported in 4Q2014 to have been signed off at RM1.07 billion or a record of RM1,400 psf, reflecting a net yield of 6%.

The report however, did state that investors are increasingly cautious owing to the depreciating ringgit and the introduction of the Goods and Services Tax that took effect in April.