Kuala Lumpur commercial property still in demand

Commercial property still looks like a good investment in Malaysia's capital, although the demand for high quality office space downtown has far exceeded what is available. This is looking like it could cause a property bubble effect, although the staff of the Kuala Lumpur City Centre (KLCC) has dismissed such a possibility.

2008 finds Kuala Lumpur with an increasingly tight supply of Grade A office buildings, primarily due to a continued heightened interest from foreign investors. REITS and other private equity groups, primarily from Singapore and the Middle East, make up the bulk of investors; however, there are also a substantial number of smaller individual investors hunting for properties. Downtown Kuala Lumpur is one of the more in demand districts.

Compounding the interests are many equity analysts who have a bullish outlook this year for the city's property market, although their projections do consider more factors than only the commercial market segment. Although much of the attention is focused on Kuala Lumpur, all of Malaysia is experiencing increased foreign investment. Singaporeans and Middle Easterners have both invested heavily into Malaysian property funds including the Injaz AsiaEquity Property fund, which was listed only last year.

With prices soaring and a tight supply of both residential and commercial properties near Kuala Lumpur, rumblings of a market bubble have begun to circulate. However, there are those who believe that there is no definite bubble on the horizon, particularly in regards to the large district of the Kuala Lumpur City Centre (KLCC).

The overriding opinion is that the market continues to adequately absorb the incoming supply and a situation of oversupply and saturation is only visible in the short term for the residential market. Approximately 3,000 residences added to the already 6,000 units will come online during the next two years.

Admittedly, the commercial market's tight supply for Grade A office space has caused an increased in rental rates for offices but not beyond what could be considered normal. Previndran Singhe, chief executive officer for Zerin Properties Sdn Bhd said, "We expect the market to reach equilibrium in the next three years. We are now able to compete better on the world stage, offering products which are comparable to our overseas competitors."