FACILITAT ING & PROMOT I N G I N VE ST M E N T F O R M A LAY S I A N R E A L E S TAT E | www.malaysiapropertyinc.com August 2011 issue 15COVER STORY pg 2THE LAND BELOW THE WIND pg 5 SPOTLIGHT MALAYSIAN ECONOMY Chief Economist of MARC, Nor Zahidi Alias gives his insights on the current global economic condition and its effects >> Read more pg 9Sabah has recorded a steady growth in GDP from 2005 to 2009 from RM25.29 NEWSFLASHbillion to RM30.8 billion, a total increase of 23%. Sabah’s GDP is largelyfuelled by its service sector with a monetary value of RM15.1 billion and has • 2Q2011 GDP FALLS TObeen growing at an average of 2.8% per annum >> Read more 4.0% • 11TH MOST SOUGHT-SPECIAL REPORT pg 7 AFTER DESTINATION FOR HIGHER LEARNINGKL CITY CENTRE CONDOMINIUM MARKET >> Read more Global economic recovery is leading to a return in investor confidence. The positive trickledown effect of the Economic Transformation Programme is a futher catalyst for return in demand for KLCC pg 13 high-end properties >> Read more GRAPHICALLY SPEAKINGINVESTOR PREFERENCES pg 8 RESIDENTIAL PROPERTYRESOURCES RICH BALIKPAPAN STOCK BY STATE, 1H2011 Enjoying the strong windfall generated by oil palm industries, wealthy businessmen in Balikpapan are on the lookout for avenues to park their money >> Read more >> Read more pg 14IN A NUTSHELL pg10 CROSS-GREEN AND GROWING BORDER QUERIES 82% of the 5.5 million square feet of green office LOOKING FOR INVESTMENT: space which is expected to be completed by 2012 Singapore company to build Tier 1 submarkets are currently certified green logistic park >> Read more >> Read more
COVER STORY 2 Sabah has recorded a steady growth in Figure 1: Sabah’s GDP trend fromTHE LAND GDP from 2005 to 2009 from RM25.29 billion to RM30.8 billion, a total increase 2005 to 2009BELOW THE of 23%. Sabah’s GDP is largely fuelled by its service sector with a monetary value 40 (RM billion)WIND of RM15.1 billion has been growing in an average of 2.8% per annum.Unleashing potential from foreign 30real estate investor interest Sabah has strong agricultural muscle whereby agriculture land accounts for 20 30% of its surface area, abundant in crops, cocoa, rubber and high yield oil 10 palm plantations. The services sector, which is the 0 largest provider of jobs, is also a majorby Afiq Syarifuddin & Grace Chang 2005 2006 2007 2008 2009 contributor to Sabah’s GDP. Its share ofThe “land below the wind” is a Sabah’s GDP was about 48% in 2009, in Source: MPI Researchmountainous terrain with rivers which wholesale and retail trade, andtraversing across it, creating deltas government services were the highest was recorded at 6.18%, well supported byinhabited by some of the earliest contributors. the 11% CAGR in property demand.human populations. Up till today, thelandscape remains mostly covered with Saleha Yusoff, Rahim & Co’s head ofdense rainforest. Sabah, as it is formally During the 60 years research quoted that prices and rentalknown, makes up one of Malaysia’s 16 administration of the British trends in the Kota Kinabalu secondarystates and federal territories. North Borneo Chartered residential market continued to be Company, Kota Kinabalu (or positive in 2Q2011. This was recentlyWith the unification of Sabah within reported in The Edge/Rahim & Co Kotathe Federation of Malaysia in 1963, Jesselton as it was known Kinabalu Housing Property Monitor forthe state experienced a development then) became a major trading 2Q2011.boom in 1967. This is still very visible post for Borneo Island due toin its current architecture. In 2000, One prime integrated developmentKota Kinabalu was granted city status, its harbour and ports as well coming up in Sabah is the RM2.5 billionmaking it the 6th city in Malaysia. as the terminus for the North Jesselton Waterfront. The 70.21 acres Borneo Railway project across the eastern coastal line ofSabah also experienced a population Kota Kinabalu has a development periodboom, growing at a rate of 285% of 8 years. Modelled after the famedbetween 1970 to 2000. By 2010, On the Real Estate Front Victoria & Albert waterfront of SouthSabah’s population stood at 3.21 million Sabah residential property performance Africa, Developer Suria Capital Holdingspeople with 27.75% of the total being has grown steadily over the past 5 years, Berhad has completed the Jesseltonforeigners, according to 2010 Census in tandem with the stable nature of Point which functions as passenger ferryconcluded by Malaysia’s Statistic Malaysia’s general property growth terminal to islands near Kota Kinabalu.Department. Over three quarters of the trend. The compounded average This project was recently showcased togeneral population inhabit the coastal growth rate (CAGR) of Sabah residential the Shanghai market in September 2011.plains of the state. properties total supply for these 5 years (continued next page)Figure 2: Notable projects in Sabah Project Project Date of Gross Development Type completion Value (GDV) Jesselton Waterfront 70.21-hectare integrated 2017 RM2.5 billion (Suria Capital Holdings Berhad) development Sandakan Harbour Square 30-hectare commercial n/a RM500 million (Aseana Properties Ltd) integrated development KK Times Square Phase 2 Commercial development End 2011 RM350 million Gleneagles Medical Centre Healthcare development 2014 RM200 million (cost) Kota Kinabalu Karambunai Integrated Resort City Eco-tourism development 2020 RM9.6 billion Aeropod @ Tanjung Aru 60-acre prime land mixed-use n/a RM1 billionSource: MPI Research
COVER STORY 3(from previous page)A n o t h e r i n t e g ra t e d m i x e d - u s edevelopment with an attachedtransportation hub is currently beingplanned by SP Setia with a grossdevelopment value (GDV) of RM110million. Strategically located oppositeKota Kinabalu International Airport, the59.21-acre development to be knownas Aeropod @ Tanjung Aru will consistof shopping mall, offices, servicedapartment, SOHO, a 3-star and a 5-starhotel and Corporate Office.The retail market in Sabah is currentlybustling with activities with the RM500million Sandakan Harbour Squaredevelopment’s 200,000 sq ft SandakanHarbour Mall and the 300-room Four Medical Centre Kota Kinabalu wasPoints by Sheraton Hotel, slated to open announced between Jesselton Wellness,by 1Q2012. This 30-hectare integrated the state investment arm Warisandevelopment by ICSD Ventures Sdn Bhd, In 2010, Sabah attracted Harta Sabah Sdn Bhd as the buildinga wholly-owned subsidiary of London- about 2.5 million tourists owner and Parkway Holding Limitedlisted Aseana Properties Ltd, sits on a of which 795,953 are as the lease-operator. Costing aboutreclaimed land facing the Sulu Sea jive RM200 million (USD66.67 million), thewell with Sandakan’s development plan international tourists private medical centre will become partas Sabah’s education hub. of the Sutera Harbor mixed integrated development with targeted completionFurthermore, Phase 2 of KK Times in 2014.Square development in Kota Kinabalu Natural Resourceswould consist of a 4-storey tourist As one of the biggest producers of Tourismarcade, a basement car park with retail/ palm oil in the world and located in In 2010, Sabah attracted about 2.5arcade, five blocks of 631 units service the middle of the Brunei-Indonesia- million tourists of which 795,953 areapartments and a five-storey elevated Malaysia-Philippines East Asean international tourists. Evidence of thecar park. Located in the prime area of Growth Area (BIMP-EAGA), it is natural state’s reputation as a key tourism hub isKota Kinabalu, this development is that Sabah steer its industrial growth proven through publicity such as Nexusexpected to satiate growing retail by tapping on oil palm-based industry. Residence Karambunai (Malaysia) beingdemands. The Palm Oil Industrial Clusters (POIC) listed as one of the top ten luxury villa was established to streamline produce resorts in South-East Asia (July 2011Acknowledging the need to better from the 1.4 million hectares of oil palm South-East Asia Property Report).utilise the resources that is bountiful cultivation in Sabah.in Sabah, the state government has The 1,500-acre Karambunai Integratedintroduced programmes to spur the One of the perks associated to POIC is Resort City (KIRC), a project under theindustrial sector. Sabah Economic the deep-water ports meant to serve government Economic TransformationDevelopment and Investment Authority international vessels and steady supply Plan, currently comprises a 5-star(SEDIA) was formed to spearhead of electricity with construction of a 500 room Nexus Resort KarambunaiSabah Development Corridor (SDC) new 300MW power plant in Lahad Datu and Karambunai Resort Golf Club.with the primary responsibility to plan, worth RM2.2 billion scheduled to be Envisioned as the premier world-classcoordinate, promote and accelerate the complete by 2015. ecotourism destination it will include adevelopment of the SDC. water theme park, water spectacles and Healthcare fountain, cable car, mangrove researchOne of these initiatives is the Kota While the healthcare tourism industry centre, harbour cruise, aqua and spaKinabalu Industrial Park, introduced in has been robust in Malaysia, especially village amongst others.1995, which now boasts 217 companies in Kuala Lumpur, Penang, Malacca andoperating within it. It is reported Johor Bharu – increasing activities inin The Sabah Report 2011 that the Kota Kinabalu clearly recognise themanufacturing sector in Sabah has opportunity and potential from thisgrown an average of 9.7% compared to sector. A collaboration on a premiumoverall Malaysia at 6.9% average. tertiary-care hospital called Gleneagles (continued next page)
COVER STORY 4(from previous page) Figure 3: Average capital value and yield in Kota Kinabalu, 1Q10-2Q11The appeal of eco-tourism in Sabahhas also prompted Best Western RM (%)International to grow its hotel stable in 370 7Malaysia with Best Western SandakanHotel and Residence in Sandakan. 6 360Moreover, The Royal Kinabalu locatedon a 6.58-acre land facing the majestic 5 350Mount Kinabalu is another notablehospitality development by Kinsabina 4Group of Companies . 340 3This development consists of a 5-storey 330hotel comprising 124 hotel rooms; two 2blocks of 5-storey Hotel suites totalling 320 1220 units and one block of 60 unitsHotel suites. 310 0 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11AccessibiltyTo date, foreign investors, especiallyfrom China, Korea and Japan are very Legend: Capital value of 2-storey terrace (RM’000)keen on the property industry in Sabah. Capital value of condominium (RM/psf)They are particularly interested in the Yield of 2-storey terrace (%)Malaysia My Second Home (MM2H) Yield of condominium (%)programme, which also registeredstrong interest amongst the Bruneians. Source: MPI ResearchTo ensure that the supporting sectorsin Sabah can be utilised to attract morereal estate investment into Sabah, Figure 4: International Tourist Arrivals in Sabah,2010crucial connectivity issues need tobe addressed. Currently MASwings Others IndonesiaSdn Bhd (MASwings) is on a route 21% 28%development plan to connect theBrunei-Indonesia-Malaysia-PhilippinesEast Asean Growth Area (BIMP-EAGA)that would involve Kota Kinabaluto Bandar Seri Begawan in Brunei, TaiwanTarakan in East Kalimantan, Palawan 6%and Mindanao in Philippines togetherwith connectivity to Pontianak in WestKalimantan. Philipines 9% BruneiBetter infrastructure and the potential Canada 14%to have more direct flights into Sabah 1%in the future allow growth possibilities USAto materialise and ensure spillover 1%into the real estate sector. While Chinaoften being touted as the desired Australia 12%tourism destination by foreigners, 3% EuropeSEDIA engages with industry players 5%to market Sabah as an attractivebusiness and investment location. Source: Sabah Tourism BoardThe aims is to translate this potentialinvestor traffics to real investmentthrough its investor-friendly policiesand incentives.
SPOTLIGHT 5MALAYSIAN the new debt ceiling can last before it has to be raised again. Whether or not furtherECONOMY downgrades take place, there is definitely a change in the sentiment and perception towards the US macroeconomic stability.Chief Economist of MARC, Nor Therefore, from investors’ point of view,Zahidi Alias gives his insights the financial risk is very real despite theon the current global economic US being the largest economy in the world.condition and its effects The question now is whether the US economy is undergoing the same stress as it did couple of years ago, and to some extent, the fear of a double dip recession is heightening. Even before the downgrade by the S&P, macro indicatorsby S.Sulocana & Grace Chang have been deteriorating, suggesting an refocus their attention back on theThe surging commodities prices, increasing downward momentum. The Treasuries. This is good as there will stillsovereign debt crisis in the US and manufacturing indicator – the ISM – is be inflows to support the current accountEurope and rising inflation has set off heading towards the demarcation line, gap in the US.alarm bells all over the world. Many the jobless rate remained above 9% andcountries are facing multiple challenges the wobbly financial market will only PQ: Some quarters had mentioned thatand are trying to find their footing on exert greater downward pressure on Asian economies particularly India andstable ground, while others brace for private consumption. China will lead the economic recovery,the fear of spill over effects. what is the likelihood of this happening? Should the US economic growth stall, Nor Zahidi:I think this is highly likely inPQ caught up with Nor Zahidi, Chief export-dependent countries such as the next decade or so. For now, China andEconomist of MARC to gain insights on Singapore and Malaysia are likely to be India could support the global economythe current global economic conditions affected as they are largely exposed to but only to a certain level as they areand its potential effects to Malaysia. the trade with the US. This can be the still depending on the G3 economies. repeat of 2001 whereby, the US economy China is performing extremely wellNor Zahidi is the Senior Vice President faltered following the September but hindered by some structuraland Chief Economist of MARC. He 11 incident and resulted in a sharp problems. These problems include lowoversees MARC’s macroeconomic deceleration in growth of the Malaysian consumption, increasing house pricesresearch and analysis, focusing on economy to almost zero percent. and rising inflation. The dependency ondomestic and major economies’ the export sector makes it more pronefiscal and monetary policy issues and PQ: The US has finalised plans to raise the to the volatility in the global trade. It iseconomic outlook. Prior to this, he debt ceiling by two stages followed by true that domestic demand is huge butwas the Chief Economist at Alliance expenditure cuts of USD2.4 trillion over consumption as a percentage of GDPMerchant Bank Berhad and Kuala the next 10 years. What’s in store for the is still relatively small. Banks are alsoLumpur City Securities Sendirian US economy? lending too aggressively and as liquidityBerhad, as well as Head of Research/ Nor Zahidi: It was a good thing that builds up, inflationary pressures will beEconomist at MCISZurich Insurance the US did everything it could and more difficult to diffuse.Berhad. He actively speaks at consequently prevented a default. Butconferences and occasionally writes the economy is still struggling and being India is also facing the same issue within local newspapers on Malaysian bogged down by problems in the labour inflation where food prices have hiteconomic trends and outlook. market. Growth in private consumption double digits. has slipped from about 2% in the firstPQ: Will the current US debt crisis affect quarter this year to almost 0% in the PQ: What is the outlook of Malaysianthe South East Asian economies? second quarter. With expenditures going economy in 2011 and 2012?Nor Zahidi: According to the IMF July to be slashed by USD2.4 trillion over the Nor Zahidi: We initially projected thereport, article 4, the US government next 10 years without any tax hike on Malaysian economy to register a 5.3%gross debt is expected to reach 112% the rich, the economy will be struggling growth this year. But with the externalof GDP by 2016. With current debt level to recover. Again and again history has headwinds – Japan’s disasters, USof 93.5% of GDP, there is possibility of taught us that excessive effort to balance economic slowdown and European debtfuture downgrades on the US credit the budget during hard times will kill debacle – the economy has slowed downrating by other rating agencies such the economy as revenues are hard to in the second quarter to circa 4% in ourMoody’s and Fitch (S&P downgraded come by because of mediocre growth view. Going forward, we foresee theit by a notch on Aug 5) especially if performance. likelihood of a persistent volatility in theWashington is seen as not having financial market until the end of the year.enough political will to agree on suitable On a slightly more positive note, thedeficit reduction process in the future. demand for USD is not likely to wane asWith rising budget deficits equivalent there is lack of better alternatives forto 10% of GDP, there is a considerable investors. Gold and commodity marketsstress in the government finances as we are too small and equity markets are tooare uncertain about the timeframe that volatile at this juncture. So investors will (continued next page)
SPOTLIGHT 6(from previous page) Rising national income is not equivalent PQ: What are the challenges faced by to rising citizens’ well-being. We can Malaysia in attracting more FDIs?Meanwhile, the US economy will see what had happened in some Middle Nor Zahidi: The challenge is the lacklikely soften more than we initially Eastern countries where people took the of knowledge workers. As mentionedanticipated. As there is a high degree of street even though their income levels previously, there is a need for morecorrelation between the GDP growths are higher than us. Not surprisingly, government partnership with TNCs toof both nations, we are of the view that recent research indicates that developed establish training centres that helpMalaysia’s GDP growth will be slightly countries such as France now prefer workers acquire the skills sets and allowlower than 5% for this year. to use well-being indicators when greater technology transfer. Different evaluating the state of their economy. regulations in each state are also aFortunately, Malaysia’s consumer concern, as it confuses investors. Thus,spending is still resilient as the labour Therefore, the government should find a centralisation of information is neededmarket remains relatively steady. balance, and they are trying this through to ease investors in making investmentMoreover, easy access to credits from the combination of ETP and GTP. In terms decisions. But the government has donefinancial institutions will support of the Human Development Index (HDI), a fair bit by having a body like PEMUDAHconsumers’ consumption binge for the Malaysia is actually within the high (The Special Taskforce to Facilitatetime being. Investments also look more income category. HDI takes into account Business) which is helping to cut downencouraging. FDIs have rebounded and of other aspects of “well-being” such as on cumbersome investment procedures.the ETP efforts to re-vitalise domestic life expectancy, education, literacy levels MIDA is also doing a fine job in “holdinginvestments have to some extent and standards of living. In addition, if we hands” of foreign investors.boosted the sentiment in the economy. also look at the GINI index, Malaysia’s coefficient has fallen, implying an PQ: Is Malaysia experiencing thePQ: Will Malaysia fall into the middle improvement in income equality in the property bubble phenomenon?income trap? What measures does past 10 years. Nor Zahidi: No, I don’t think so. PropertyMalaysia need to incorporate in order prices have climbed tremendously atto steer clear from this anticipated To steer clear from the middle income certain areas within Klang Valley butconundrum? trap, the government is planning to it is not a broad based phenomenon.Nor Zahidi: We are in the middle income introduce minimum wage for workers There are some elements of speculationtrap. In Malaysia, 70% of the population in certain types of jobs. Further to this, in the market in this segment and thisare earning less than RM1,500 per we also need to liberalise some areas of is the reason that the Bank Negaramonth and within Kuala Lumpur, 34% our economy, especially those related Malaysia has introduced measures likeare earning below RM 1,500 per month. to the knowledge-based industries. lower Loan-to-Value (LTV) ratio in orderThis is critical as the cost of living is rising We are also focusing on the services to clamp down on these speculativeand people are getting queasy. Between sector instead of relying mainly on the activities. The BNM is also using moreJuly 2007 and now, the CPI has risen by manufacturing sector. FDIs in high-value administrative measures such as11% and the cost of food has climbed added sectors are also promoted and increasing down payment on propertyby 22%. That has put some pressure on efficient technology transfers can be purchases and other macro prudentialconsumers’ pockets. realised through implementation of joint measures. Overall however, the effort programs between transnational Malaysian demographics are supportingHowever, looking it from a broader angle, corporations (TNCs) and the government. the demand for properties. So it looksI think that we are a bit fixated with GDP There also should be more allocations for pretty okay at this juncture.measures. My view is that we should also R&D as Malaysia’s expenditures on R&Dconsider citizens’ well-being. are relatively low (below 1% of GDP). PQ: What is the property and construction industry outlook for 2011Figure 5: Trends in the Human Development Index, 1980-2010 and 2012? Index Nor Zahidi: There is a slight concern on the 1.0 construction industry as there is some 0.9 delay in project awards. This is reflected 0.74 in the CIDB statistics. There is a strong 0.8 correlation between project awards and 0.7 construction output, the growth of this 0.6 sector may moderate in the short term. Therefore, the government may wish to 0.5 speed up the project awards to boost the 0.4 activities in the construction industry. 0.3 The property industry has a neutral 0.2 outlook. Measures such as the LTV limit 0.1 of 70% by the Malaysian Central Bank 0 on a consumer’s third property as well as higher capital charge for mortgages will 1980 1985 1990 1995 2000 2005 2010 unlikely slow down property purchases.Legend: Malaysia East Asia and the Pacific World For more information about MARC, visitSource: UNDP http://www.marc.com.my
SPECIAL REPORT 7KL CITYCENTRECONDO-MINIUMOUTLOOKby S.SulocanaEver drove past the KL City Centre (KLCC)and wondered why very few people are Kuala Lumpur city centre skylinestaying in the condominiums despite the80% take up rate? ar, the total supply of existing Figure 6: Range of rental yield (%) condominiums and serviced residencesThis is because most of the condominium (mid-range and above, with average pricesunits are bought by speculators who are of RM350 per sq ft or higher) in Kuala Tier Range ofexpecting capital appreciation of 20- Lumpur was 32,742 units, representing Rental Yield (%)30%. Post 2008 global financial crisis, the a 4% increase since the end of last year.prices of these properties had remainedstagnant due to slower demand. The Tier 1 3.00 - 8.46price growth is also losing momentum Global economic recovery Tier 2 2.70 - 11.00due to speculators holding on to is leading to a returnthese properties waiting for economicrecovery. The high end condominium in investor confidence. Source: CBD Properties, MPI Researchmarket especially at the KLCC has not The positive trickledownseen strong capital appreciation since effect of the Economic Of these, about 44% or 14,514 units were2008. Average rental yield in Tier 1 area Transformation Programme located in the Golden Triangle, centralis almost less than 50% of Tier 4 areas business district and Ampang areas, withsignalling dampening demand of high- is a futher catalyst for 34% or 11,121 units in Mont’Kiara and Sriend condominium properties in KLCC. return in demand for KLCC Hartamas. About 38% of the supply of high-end properties condominiums and serviced residencesIn a recent CB Richard Ellis report, it was were tagged at between RM350 andstated that in the first quarter of this ye- RM499 per sq ft, with a further 38.6% priced at between RM500 and RM799 per sq ft. The remainder, or 24% of the units, were priced at RM800 per sq ft onwards and categorised as luxury residential units, most of them located in the vicinity of the Suria KLCC shopping centre. Tier 2 Christopher Boyd of CB Richard Ellis concurred that average capital values in Tier 1 the three main condominium markets (KLCC, Bangsar and Mont Kiara) in Kuala Lumpur had remained relatively steady since the 2008 global financial crisis.Source: Ho Chin Soon Research
INVESTOR PREFERENCES 8 Figure 7: Indonesia Real GDP growth, 2000-2010RESOURCE Growth rate (%)RICH 08/09 7 Y2K subprime bubble crisisBALIKPAPAN 6 burst 5Bountiful gains attracting Balik- 4papan wealthy to look outwards 3 2 1 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010by Afiq Syarifuddin Source: Various sourcesEast Kalimantan, located on the Borneo Property Quotient general survey duringIsland with Malaysia’s Sabah and a recent trade and investment missionSarawak states as direct neighbours, is found out that their current preferred Upcoming MPI Indonesia Market Eventswell known to be resource-rich and also markets are Singapore and Australia. open for participation from Malaysianfor having the largest coal deposit in the developers and real estate companies.world. As one of the leading province of However with improved connectivity andEast Kalimantan, Balikpapan serves as regular engagement, Sabah should be • 12-13 November 2011: Malaysiathe gateway to the East Kalimantan seen as a natural preferred destination Property Showcase, Jakartathrough its Sepinggan International due to its shared geographical terrain • 2012: Malaysia Property Showcase,Airport and seaports. and cultural similarities. To spur this, Balikpapan, East Kalimantan governments of both sides shouldBest known as the central oil refinery address infrastructure needs such as For more information please contacttown for East Indonesia, Balikpapan is direct flight servicing Kota Kinabalu and Mr. TJ Cheah:one of Indonesia’s leading cities with Balikpapan route and also improving firstname.lastname@example.org population of 614,681 people and road networks linking both towns.2010 GDP growth of 5.65%. Figure 8: Indonesia Economic Factbox,2010It has also managed to attract foreign Population (millions) 237.6interest, further evidenced by the Working age population (millions) 171.0participation of a Russian investment Total employment (millions) 107.4in its railway project that would in the GDP at current prices & current exchange rate (USD billions) 540.3future link East Kalimantan to Central GDP per capita at current prices & market exchange rate (USD) 2,349.4Kalimantan. Total investment of this Average annual real growth over previous 5 years (%) 5.6project is Rp 17 trillion. Current account (USD billions) 10.7 Export of goods (USD billions) 118.0Enjoying the strong windfall generated Import of goods (USD billions) 85.3by oil palm industries, wealthy Outstanding external debt (USD billions) 172.3businessmen in Balikpapan are on thelookout for avenues to park their money. Source: OECD Economic Survey, Indonesia Balikpapan, East Kalimantan
NEWSFLASH 92Q2011 GDP Figure 9: Malaysia GDP Growth Rate (%) PercentageFALLS TO 4.0% 12.0 (%) 10.0Malaysia’s 2Q 2011 GDP declined to 4% 8.0y-o-y from 4.9% in 1Q 2011, signaling 6.0that the current economic turmoilis affecting growth. This growth 4.0rate number is slightly higher than 2.0Bloomberg’s consensus estimates of 03.6%. Domestic demand during 2Q grew 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 -2.05.2% y-o-y due to sustained growth inprivate spending. Private consumption -4.0remained healthy amid robust labour -6.0market conditions, while private capital -8.0spending was sustained by expansion Source: Department of Statisticsin production capacity and investmentin new growth areas. Malaysia’s Figure 10: Inflation Rate (y-o-y % change)manufacturing sector dropped to 2.1%y-o-y in 2Q, compared with 5.5% in the Percentage (%)preceding quarter. According to Bank 10.0Negara Malaysia (BNM), full year GDP 8.0growth rate will hover around 5%.Malaysia’s GDP for the first half of the 6.0year grew 4.4% y-o-y, compared with 4.09.5% y-o-y in the corresponding period 2.0last year. BNM also highlighted that 0the country’s inflation, as measuredby the consumer price index (CPI), had Mar-08 Mar-09 Mar-10 Mar-11 Nov-07 Nov-08 Nov-09 Nov-10 -2.0 Jul-07 Jul-08 Jul-09 Jul-10 Jul-11eased marginally last month. CPI for July -4.0gained 3.4% y-o-y, compared with 3.5%y-o-y. Source: Department of Statistics11TH MOSTSOUGHT-AFTERDESTINATIONFOR HIGHER Malaysia’s Private Higher Education Asian Correspondent recentlyLEARNING Institutions deputy director-general, Datin Dr Siti Hamisah Tapsir recently conducted a poll among its readers to identify students’ decision-making reiterated that Malaysia remains the process in choosing a higher-learning 11th most favourable destination for destination. The students based their higher learning among international decision on these factors, namely: students. • internationally recognised degrees Accounting for two per cent of the • well-known research works international student population • distinctive campus experience around the world, as reported by • varied community, and UNESCO, international students in • employability advantages Malaysia has exceeded 90,000 people as of June 2011. With this strong interest registered in this segment, Property Quotient US Newsweek World’s Best Countries posit that the demand for student- survey in 2010, places Malaysia in the top friendly accommodation will continue 8 of its education category rated among to grow, especially in higher-learning upper middle-income nations. Malaysia centric locations such as Petaling Jaya is also ranked by Asian Correspondent as in Selangor and the Iskandar region in one of the top 5 education destinations Johor. for Asian students.
IN A NUTSHELL 10GREEN AND Figure 11: GKL’s Green Office Building RadarGROWINGGreater Kuala Lumpur’s futuresupply of “Green” office buildingsis set to grow Subang International Airport Tier 1by Hazrul IzwanAs countries strive for development,there is an increasing need to encourage Tier 2a “Green” and sustainable environmentthrough infrastructure, facilitiesand buildings that will enable us to Tier 3work, live and play peacefully in a realgreen atmosphere. Now, under the“I Greened KL” campaign launched byKuala Lumpur City Hall (DBKL), which Legend: Completedis one of the Entry Point Projects under Under construction Kuala Lumpur International AirportMalaysia’s Economic Transformation Forest reserveProgramme, every resident can enjoy Kuala Lumpur City Centresufficient green space. In other words, International Airportthe GKL will be among the world’s top- Source: MPI Research20 cities in terms of economic growthand liveability by 2020. From the Green Office Building Radar, we can clearly see that newThe term “Green” is not new to us. Back developments that were reported untilin 2004, Kuala Lumpur International 82% of the 5.5 million square the year 2014 are concentrated in theAirport’s (KLIA) effort to promote feet of green office space KL Sentral development and withinenvironment responsibility for all local the Kuala Lumpur City Centre (KLCC)and foreign travelers was recognized by which is expected to be vicinity. Another important point toGreen Globe, making it the first and only completed by 2012 in Tier note is that 82% of the 5.5 millionairport in the world at the time to receive 1 submarkets are currently square feet of green office space whicha Green Globe 21 certification. After certified green is expected to be completed by 2012 infive years, a proper rating tool for green Tier 1 submarkets are currently certifiedbuilding in Malaysia was established, green.called the Green Building Index (GBI).The GBI is used to preserve and save the Kuala Lumpur Sentral, developed byenvironment in line with the interests of In Tier 1, we found that four buildings Malaysian Resources Corporationmost companies, which is evident from have been completed and seven Berhad (MRCB), has established manythe increasing importance of corporate developments are in progress, milestones which have contributedsocial responsibility (CSR) that supports scheduled to be completed between significantly towards shaping itsenvironmentally-friendly initiatives. the fourth quarter of 2011 to 2014 reputation as the new central business with a total net lettable area (NLA) of district (CBD) in Malaysia. It is wellThe supply of green buildings in GKL 4,270,656 square feet and 1,239,000 positioned to offer state-of-the-artis growing significantly regardless of square feet respectively. Most buildings solutions and value for businesswhether the buildings are for private or in Tier 3 are completed and have been advantages for local, regional andgovernment use. Within our analysis, built since 2009. The Green Energy international brands.there are currently 12 green office Office (GEO) building is Malaysia’s firstbuildings located within Tier 1 and green-rated building, located in Bandarthe four other remaining buildings are Baru Bangi or within Tier 3. It waswithin a radius of 30 km from KL Sentral, officially awarded with a GBI platinumnot including a proposed project and status on July 24, 2009. The building wasthree sales offices which are KRC Sales planned earlier in 2005 as a showcaseGallery, Eco Gallery of Setia Eco Garden of an energy-efficient building in orderand The Sage: Seringin Residences Sales to create awareness among industryGallery. players, particularly in Malaysia. (continued next page)
IN A NUTSHELL 11Figure 12: List of green buildings in Tier 1 submarkets, 2009-2014 Project Location Rental Rate No. of Floor Net Lettable Comple- MSC Certification (RM/sq.ft/ Area (NLA) tion Date Status by month) (sq.ft) GTower Jln Tun Razak 7.50 30 120,000 2009 Yes BCA & GBI The Horizon, Phase 2 Bangsar South 5.50 4x13 216,000* 2009 Yes GBI 1 First Avenue Bandar Utama 5.50 25 630,000 2010 Yes GBI KL Sentral Park KL Sentral 8.50 4-7 514,827 3Q2011 Yes BCA Menara Worldwide Bukit Bintang 6.00 27 273,000 3Q2011 No GBI Menara Binjai KL City Centre 7.50 35 330,000 4Q2011 No BCA & GBI 348 Sentral KL Sentral n/a 30 & 24 557,152 2012 No LEED Menara Felda KL City Centre n/a 50 689,000 2012 Yes GBI Integra Tower Jln Tun Razak 12.00 39 736,000 2Q2012 No LEED PHB Office Tower KL Sentral 7.00 27 440,000 4Q2012 Yes LEED Q Sentral KL Sentral n/a 42 1,003,677 2014 Yes GBISource: Various sources, MPI ResearchNote: * Gross Floor Area (GFA) Spanning across 102 acres, located in the (from previous page) Tianjin Binhai New Area, a 40km away Generating “Green” from Tianjin city centre, Tianjin Eco-city project will be carried out on a 60:40 joint- Track Record Overseas venture basis with the master developer, Phased until 2016, Kuala Lumpur Sentral Sino-Singapore Tianjin-Eco City (SSTEC) is a world-class city valued at a massive Investment and Development. With RM15 billion; comprising Malaysia’s estimated GDV of RM5 billion, this will largest transit hub Stesen Sentral, Sunway Berhad now has over 30 ongoing consist of 80% residential and 20% of corporate office towers and business developments on its 2,160 acres of commercial properties. The company is suites, 5-star international hotels, land bank with potential total GDV expected to begin construction of Phase luxury condominiums and a shopping of RM23 billion. With RM2.9 billion 1 residential project in 4Q 2011 and the mall. market capitalisation reported recently, period of development is expected to be Sunway Berhad stands among the Top 5-7 years. With RM4 billion completed and RM6.3 10 developers in Malaysia. billion development in progress, Kuala By introducing a LOHAS (Lifestyles of Lumpur Sentral is the single largest Sunway’s overseas ventures make up Health and Sustainability) concept with commercial development in Kuala 32% of total future GDV where 23% is five guiding principles that emphasize Lumpur today. Kuala Lumpur Sentral contributed by the China market. Based conservation of energy, water, materials, has already attracted prominent on recognized track records, continuous land and maintenance is a must, Sunway investors to set up their businesses, as efforts and high commitment in aims to get the highest rating from the well as an international community to developing green projects in Malaysia, Green Building Tianjin Eco-City Standard set up their homes and offices within Sunway was chosen as the sole Assessment (GBES). Sunway’s Tianjin the environment. Malaysian developer to participate Eco-city development is balanced in in the development of Tianjin-Eco terms of environmentally-friendly, As a market leader, Kuala Lumpur Sentral City together with other top regional sustainability, practical and replicable. have five green buildings currently being developers from Singapore, Taiwan, It will be Sunway’s pilot project for constructed that will contribute to Hong Kong and Japan. further property developments in China. more than 2.5 million square feet to the market with an average rental rate of RM7.00 to RM8.50 psf. Singapore 5% Figure 13: Sunway’s Remaining All new developments currently under Others GDV breakdown construction within Kuala Lumpur 4% Sentral meet local and international China green building certifications. These 23% buildings include 348 Sentral (Menara Note: Based on Sunway’s Shell and serviced residences managed effective interest in all by Ascott), KL Sentral Park, Nu Sentral Malaysia projects retail mall and two office towers at Lot 68% G. Source: Company data (continued next page)
IN A NUTSHELL 12 (from previous page) KL Sentral Park, a unique, state-of- the-art, distinctive and green campus office, has achieved the highest green international certification – the Platinum rating (provisional) from Singapore’s Building and Construction Authority (BCA) Green Mark and is the first commercial development in Malaysia to meet the standards. This RM720 million development consists of five blocks of low-rise office buildings with a unique green artistic feature where SME Corporation and SBM Malaysia are amongst the anchor tenants. Certified Gold Standard by US Green Energy Office Building, Bandar Baru Bangi Leadership in Energy and Environmental Design (LEED) developments such as 348 Sentral is scheduled for completion world-class tenants with price ranges tenants and investors a rent-per-floor in 2012. It consists of 33-storey office from RM1, 190 to RM1, 575 per square basis and open for sale by en-bloc basis, tower that will be leased to Shell as their foot. also making available office spaces regional office for 15 years and another ranging from 100,000 to 125,000 21-storey serviced residences that will Apart from KL Sentral green projects, the square feet. be managed by Ascott. Whilst at Lot G KLCC vicinity also provides competitive - the office tower owned by Pelaburan rental rates; Menara Worldwide in Bukit In a nutshell, the supply of green-mark Hartanah Berhad (PHB) is Silver Leed Bintang offers the lowest rates within buildings in GKL in 2011 is growing by Certified and Green Building Index (GBI) this area at the rate of RM6.00 per square 15.7% compared to the total existing certified and adjoining to the office foot per month while the most expensive stock reported in 2010. On the rental tower is the 7-storey Nu Sentral retail rental rate in the market is headed up rate front, we found that the average mall which is also certified BCA Green by Integra Tower which is attached to rental rate of green buildings in KL Mark of Singapore and certified GBI. The Intermark with RM12.00 per square Sentral and KLCC vicinity is 26.9% foot per month, further enhanced by higher than the average rental rate of Other new developments in Kuala the presence of DoubleTree by Hilton. standard prime buildings in the city Lumpur Sentral include the Q Sentral In July 2007, both these buildings centre. Although the rates are higher, office tower, the latest stratified office were taken over by MGPA, a private it has the capability to attract a large tower built on a 1.85 acres site that will equity real estate investment advisory number of occupiers and multi-national supply 440 units of office space with including Vista Tower, a 62-storey grade corporations (MNCs) such as Shell, as a gross floor area (GFA) of1.4 million A office tower and a retail podium, the CSR factor becomes increasingly square feet. This final phase of grade A previously known as Yow Chuan Plaza. more important for them. Furthermore, stratified office tower in Kuala Lumpur Menara Binjai and GTower also provide most of these buildings are connected Sentral is available for sale to individual competitive rental rates, 15% more via the public transportation system investors, MSC-status companies and expensive than the market average allowing further accessibility. rate. These green buildings have similarFigure 14: Future Supply of Green Office characteristics to the development in KL On another note, developers and Buildings within 10km Radius Sentral whereby both are connected via investors must take this opportunity to from Kuala Lumpur Sentral the light rail transit network that is only explore the potential development of sq.ft within five minutes walking distance. green buildings through acquisition or (in ‘000) refurbishment of existing buildings in 2,500 1 First Avenue in Bandar Utama is the the GKL to support a growing demand. closest competitor to The Horizon in The government also offers incentives 2,000 Bangsar South, offering the same rental to encourage green development, rate at RM5.50 per square feet. However, such as tax incentives that entitles 1,500 in terms of capability to occupy office developers to an exemption on space and attracting quality tenants, statutory income of up to 100% of 1,000 we find that 1 First Avenue has the their expenditure. Through pursuing strength to attract foreign companies green development, we will be able to 500 because of its strategic location near the generate economic growth through Subang International Airport via New increased investments as well as Klang Valley Expressway (NKVE). 1 First develop our country towards a more 0 2009 - Post Avenue attracted Quintiq, Schlumberger sustainable and liveable future. 2011 2012 2010 2012 Global Business Center and many others.Legend: Completed From recent reports, the occupancy If you interested in making GKL greener, Under construction rate is 100% while The Horizon uses a please register at: different approach by offering potential http://www.igreenedkl.com.mySource: MPI Research
GRAPHICALLY SPEAKING 13RESIDENTIAL growthPROPERTY STOCK + 4.5%BY STATE, 1H2011 UNDER CONSTRUCTION = 535,971 units Kuala Lumpur 7% Selangor Other states growth 41% 24% + 18.4% EXISTING STOCK = 4,466,062 units Johor 14% Kuala Penang Lumpur Sabah 7% 9% 7% Other states 36% growth 5.3% Selangor 29% + INCOMING SUPPLY = 560,636 units Sabah Penang 3% Johor Kuala 8% Lumpur 15% 7% Selangor 22% growth Other states 45% 23.6% + HOUSING STARTS = 24,665 units Johor 13% Penang Kuala Sabah 7% Lumpur 6% 13% Selangor 14% Other states 46% Johor 14% Penang 11% Sabah 2% Source: NAPIC, MPI Research Note: Percentage growth is calculated based on the figures in 1H2011 compared with 1H2010
CROSS-BORDER QUERIES 14CROSS-BORDERQUERIESMalaysia Property Incorporated (MPI) receives foreign investor queries on an ongoing basis. For any parties interested topersue these investment requirements, please contact the MPI team. Request Client Requirement Location3Q 2011Landbank, Singapore 10 acres and above of freehold land Klang Valleydevelopment rights to build logistic park (Shah Alam, Bukit Raja)Landbank, Singapore Mixed development with medical Klang Valley,development JV component, medical resort Johor, Penang (e.g medical themed service apartments), Retirement village 2Q 2011 Landbank, Seoul, Korea 20 acres, KL city centre development rights mixed development Asset acquisition Shenzen, China Golf course with land for Greater KL vicinity residential development Landbank, Singapore Industrial park development, Greater KL vicinity, development rights (size TBA) Iskandar region Landbank, Jakarta, High-end residential development Greater KL vicinity, development JV Indonesia (size TBA) Iskandar region Asset acquisition, Kuala Lumpur, Commercial developoment Greater KL vicinity development JV Malaysia opportunities, Grade A office en-bloc Landbank, Shaanxi, China Mixed development land Kuala Lumpur or development rights or construction Johor Bahru 1Q 2011 Construction JV Seoul, Korea Infrastructure projects with Nationwide Minimum Return Guarantee
ABOUT USMalaysia Property Incorporated is a Government initiative setup under the Economic Planning Unit to drive investments inreal estate into Malaysia.As the first port-of-call for real estate investment queries,Malaysia Property Inc. connects interested parties throughan extensive network of government agencies, private sectorcompanies, real estate firms, business councils and real estate-related associations.MPI has two core objectives; to create international awarenessand to establish connections between foreign interests andMalaysian real estate industry players, ultimately contributingto real estate investments into the country.For further information andup-to-date tracking of Malaysian real estate data, visit:www.malaysiapropertyinc.comFor further enquiry, write to:email@example.comDisclamer: This report contains information that is publicly-available and has been relied on by Malaysia Property Incorporated on the basis that it is accurate andcomplete. MPI is not liable if the case proves to be otherwise. No warranty or representation, express or implied, is made to the accuracy or completeness of theinformation contained herein, and the same is submitted subject to errors, omissions, change of price, rental or other conditions, withdrawal without notice, and to anyspecial listing conditions imposed.