Klang Valley's property market is "saturated" and high land prices are pushing potential investors away into newer but cheaper areas, according to Axis Real Estate Investment Trust (REIT) Managers Bhd.
In Shah Alam, for instance, companies were disposing their land prior to moving out to other areas such as Nilai, noted Stewart LaBrooy, Chief Executive Officer and Executive Director of Axis REIT.
"The Klang Valley is now too expensive for a lot of investments (such as) in Shah Alam. Land prices for industrials in Shah Alam for recent transactions are now about RM120 psf compared with Petaling Jaya 10 years ago at RM90 psf," he said.
"It is getting to a point where Shah Alam will not be able to have price points to support industries per se."
He added that the rapidly increasing house prices are forcing the engineers and workers to move out of the Klang Valley. Thus, "industries today are lacking a good pool of labour who are close to the source."
Because of the saturated market status, Axis REIT is now slated to focus on property markets in Johor Bahru and Penang and will make adjustments to their strategy.
The company had recently completed the purchase of 1 Logistic Dc in Bayan Lepas and Prai in Penang, and is eyeing two properties in Johor.
"We are also buying two properties in Petaling Jaya but this came about basically because it is owned by our promoters of the REIT. One of the directors owns the building so we can get it at a very good price," said LaBrooy, adding that the company got the property at a big discount and will redevelop it to get a better return for their shareholders.
Presently, Axis REIT is in negotiation to acquire properties in the Port of Tanjung Pelepas in Johor and will likely purchase seven additional properties by the end of 2012.
LaBrooy said it is quite challenging yet very rewarding to look for good assets to put into the REIT.
With a high market price it will surely drive investor away, this is because they cannot get in return the value of their money. Aside from that they will be looking for some properties that is more cheaper yet does have the same quality as the high price properties.
ReplyDeleteEventually the market price would not fluctuate in the coming few years and for established tenants it should not be a problem for them to sustain in this niche market. We shall be seeing concentrated rather than saturated mixed tenants in KLCC area which may make this area even more prestigious.
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