Commercial sector clouded by uncertainties

Consultancy expects softer climate for first 10 months

PREDICTIONS are never easy, and today’s current property market is more difficult to fathom with several national and global wild cards on the table.

This confluence of factors are expected to impact the property market this year. On the national front, there is the weak ringgit/weak oil price, the April 1 implementation of the Goods & Services Tax (GST) and the unravelling 1MDB issue. 

Globally, sources of uncertainty include the European Central Bank’s (ECB) expanded asset purchases which started this week with more countries cutting interest rates.

According to property consultancy Knight Frank’s inaugural Malaysia Commercial Real Estate Sentiment Survey 2015, “there is so much uncertainty surrounding the Malaysian commercial real estate’s likely performance.” 

The survey was concluded in the second week of January, before the ECB’s 1.1 trillion-euro (US$1.2 trillion) or 60 billion euro-a-month bond-buying programme which started earlier this week and before the fast-unravelling 1MDB issue.

In his opening address, Knight Frank Malaysia’s managing director Sarkunan Subramaniam predicted that “at least for the first 10 months of this year, the commercial investment market will see a softer subdued climate.” 

“The healthcare/institutional and hotel/leisure sectors are likely to be more resilient while the office sector seems likely to see some strain. The retail sector will have a slightly poorer year but certainly better than offices,” says Sarkunan.

The logistics/industrial sector may actually turn up to be “a good surprise” for investors, he says.

“But do remember while sentiments do drive the market, hard facts determine said sentiments,” he says. The commercial sector is affected by the GST, while the residential sector to a much lesser degree, says Sarkunan. 

Given time to adjust, there may be more clarity by October/November, he says.

About half (48%) of the Knight Frank survey which concluded in January comprised developers, a third of them fund/Reit managers and a fifth of them (19%) commercial lenders.