MNCs pivotal to healthy office market

FOREIGN FACTOR: More foreign tenants are needed to maintain high occupancy rates in a market flooded with office options, InvestKL CEO, Zainal Amanshah tells NST RED

InvestKL is a government initiative to attract large global multinationals (MNC) such as Fortune 500 and Forbes 2000 companies to set up their regional hubs in Kuala Lumpur. As more office developments are launched in the Klang Valley, especially Grade A offices, MNC tenants are highly sought after to fill up these units. NST RED talks to InvestKL CEO, Zainal Amanshah for his insights on MNC requirements in the Klang Valley office market.

RED: In InvestKL’s experience dealing with major MNCs and foreign companies in Klang Valley, what are some of their main office requirements?

Zainal: Their requirements depend on the nature of their businesses. InvestKL concentrates on the following business areas – business services, healthcare, agriculture, oil gas, finance and electrical electronics. Based on our experience, the locations selected by MNC’s are based on their specific sectors. For example:

    
Business services consultancy: Most prefer not to be located at Central KL. For example, our client Aecom, Regional Centre of Excellence, which provides MRT (Mass Rapid Transit) engineering consultancy, is located at The Curve, Mutiara Damansara. Another client, Service Source International is located in 1 Mont Kiara. It started from ground zero and after more than two years, the company has 1,000 workers.   

Healthcare: The Asean Sleep Research Center, a collaboration between Phillips and UM (University of Malaya) is the first of its kind in the region and will be located at UMSC (University of Malaya Specialist Centre).

Aerospace: Augusta Westland is located at  Subang Airport.

Oil and gas: KLCC (Kuala Lumpur City Centre) is known as the oil and gas hub of Klang Valley. Numerous conferences and events for oil and gas are held within the area. This location is currently home to Exxon, Petronas and Sarawak Shell.

RED: Does InvestKL provide any advisory on finding good locations for offices to potential MNCs/foreign companies coming to KL and what are some of the issues and challenges?

Zainal: InvestKL’s focus is to assist MNCs in establishing and expanding their regional operations in Greater KL. For locations we will work with Malaysia Property Incorporated (MPI), private companies and other reputable realtors.

MNCs/ foreign investors’ criteria would be as follows:

•    Appropriate location based on their specific industries

•    The building must cater to their expansion plans

•    Talent plan: Companies with fewer than 200 staff will usually prefer to be in Central KL mainly due to transportation issues. It should be central enough with less traffic and good connectivity (especially public transportation). We have received many queries on KL Sentral area mainly because of the connectivity, office facilities and hotels

•    MSC status: In KL and PJ, there are 19 MSC (Multimedia Super Corridor) certified buildings (buildings that fulfill MDC (Multimedia Development Corporation) requirements e.g. guaranteed broadband connection,  etc)

•    Grade A buildings: High-end facilities especially on connectivity (WiFi broadband capacity)

•    MRT : accessibility

 

RED: Are factors such as traffic congestion and skyrocketing prices/rentals in central KL forcing MNCs to look for alternatives outside of Central KL?

Zainal: It is true in some way but it’s usually driven by the industries and their business expansion plans. Better public transportation, especially the much talked-about MRT2, MRT3 and HSR (High Speed Rail) between Singapore and Malaysia, will hopefully address connectivity issues. With the completion of the MRT projects, we foresee that KL will be far more attractive in terms of connectivity, functions and activities.

Rentals at the city fringes can be more expensive than the city centre. Rentals for office space at Kuala Lumpur Sentral are at RM7.25 psf. Knight Frank Klang Valley Monitor 4Q2012 also reported that there is marginal occupancy decline of 0.5 per cent in the city centre due to the entry of Integra Tower@The Intermark while the city fringe recorded a 1.3 per cent increase.

In other words, the decline of occupancy in the city centre is quite marginal, and doesn’t seem to support the perception that MNCs are moving out of the city centre

RED: How does KL’s office market rate against other countries in the region and what are some of the areas for improvement?

Zainal: By far, KL rental is more competitive and cheaper compared to Hong Kong and Singapore. MNCs find that KL is attractive as we are a multilingual society with high English proficiency. Due to the efficient connectivity around Greater KL, the city is easily accessed through numerous trains and buses.

Malaysia is one of the region’s most competitive countries in terms of cost – cost of doing business, living and talent. Cushman and Wakefield in its report, “Global Office Forecast 2013-2014” dated December 2012 said KL will continue to offer the lowest rental per square foot in the class A/prime rents in 2013 and 2014 in comparison to Singapore, Jakarta and Bangkok.

Overall, the MNCs are pleased with the cost and quality of office space, the options available, be it city centre or suburbs, quality of facilities such as broadband and telecommunications services, and infrastructure in the city.

There are, of course, areas for improvement, which relate more to the overall experience of working and living in the city, as opposed to office space. The areas include better public transportation system to alleviate the congestion in the city and the need to make the city more liveable. The government is looking into all these areas under the ETP (Economic Transformation Programme). Under the Greater KL National Key Economic Area, we are making good progress with the MRT, the high speed train project is on track, Greater KL is becoming greener with 30,000 trees planted annually and the city is becoming more pedestrian-friendly.

RED: Is there a need for local property developers to cater to the high-end/Grade A office market to attract more foreign MNCs and companies to set up in KL?

Zainal: We need to further develop the whole eco-system required in the industry and Grade A offices provide advanced facilities.  Strong brand presence in the international market (e.g. Battersea Project by Sime Darby SP Setia) directly enhances our property developers’ credibility when it comes to offering properties to foreigners.

As I have mentioned earlier, while office space and rentals are important, MNCs have other more critical criteria in evaluating whether to set up in Greater KL, including ease of doing business, availability of talent, cost of doing business and living, liveability and incentives.

Skyline of office towers in the popular Bangsar area.

Zainal … “Office rental in KL more competitive compared to Hong Kong and Singapore.”

MNCs pivotal to healthy office market