PJU's new commercial areas to be a hit in time to come

DESPITE being one of the fastest growth areas, commercial properties in PJ North are expected to experience some pressure in terms of rental yields and sales.

Popularly known as PJU (U for utara), the area encompasses Kota Damansara, Mutiara Damansara, Damansara Perdana and Bandar Utama.

Ong: Professional services tend to go for strata projects.

PJU, alongside the Lebuhraya Damansara-Puchong (LDP), has some of the most prestigious office towers in the Petaling Jaya suburb, says Reapfield president David Ong.

These include Menara Batu Kawan (a Batu Kawan Bhd project) and Surian Tower (by Boustead Group), both in Mutiara Damansara, and 1 First Avenue (developed by First Nationwide Group) in Bandar Utama. All three will be ready for occupation this year and next.

In Kota Damansara, there is The Strand, which comprises several hundred units of shop lots. The Strand is developed by Encorp Bhd. The units are ready for occupation.

“Two main factors make PJU popular. The amenities here are a boon for both office workers and residents. There is congestion but the infrastructure and access are all here with a number of linkages. The second thing going for PJU is its growing population,” Ong says.

When offices relocate, they will consider these two factors, together with rental demands in the area, which are very competitive when compared with rental rates in Kuala Lumpur, Ong says.

The average rental here is between RM4 and RM4.50 per sq ft (psf), compared with RM6 to RM8 psf in KL Sentral and the Commercial Business District of Kuala Lumpur. For the Twin Towers, the rental rate is about RM12 psf. Surian Tower and Menara Batu Kawan will be ready for occupation this year while for 1 First Avenue offices can move in early next year.

“Considering that these are Grade A offices, the rates are competitive. Their closest competitors will be Jaya 33 in Section 13, Petaling Jaya, which has about the same rates,” says Ong.

Because it has MSC Cybercentre status, the rental rate at 1 First Avenue is expected to be between RM6 and RM6.50 psf. 1 First Avenue is the second phase of the First Nationwide Group’s project in Bandar Utama. In the first phase, known as 8 First Avenue, KPMG and IBM took up the whole of two office blocks. Ong says demand from the first phase will spill over to the second phase. Further up the LDP is the PJ Trade Centre project by Tujuan Gemilang Sdn Bhd, with rentals there going for RM3.50 psf.

Potential prospects, says Ong, would be companies looking to relocate. “They want to get away from the congestion in the city and are in search of lower rentals. That would be our main market. We are not looking at new entries, bearing in mind the current uncertain times. At the same time, we are also aware that many companies are reluctant to fork out the cost of moving.”

As public transport amenities improve – the entry of the light rail transit (LRT) system, for example – more conveniences will be created in the future.

These new office blocks will be more popular than strata projects like BU 8, next to Centrepoint, and 3 2 Square in Section 19, Petaling Jaya.

“Professional service providers like legal firms and consultancies tend to go for strata projects. Purpose-built offices like Menara Batu Kawan, Surian Tower, UAC and the office block in Tropicana City attract multinational companies (MNCs) and the bigger local companies,” says Ong.

Ong expects the take-up rate to be slow owing to the current challenging times. “These offices will be rented out, in due time,” he says.

The pressure, says Ong, would be greater on the shop lots at The Strand, which also comes under the commercial property segment.

The Strand, next to Dataran Sunway, comprises mainly shop lots.

“The people who bought into The Strand are mainly investors. They saw the popularity of Dataran Sunway and entered into that market hoping to make money. They will still profit from their investments, but the margin will be thinner.”

Kota Damansara has several hundred units of shop lots. Since September 2008, the rental for a ground floor unit has dropped from RM6,000 to RM4,500. In contrast, the rental for shop lots in SS2, Petaling Jaya is about RM10,000 a month, which is a premium. In Bangsar, the rental for shop lots is more than RM10,000 a month.

“Because the yield today is not as high as the owners would like it to be, many of them may want to sell, which will put pressure on pricing. If they have the holding power, Kota Damansara will be a major growth area in the years to come,” he says.

The shop lots were sold for between RM1.3mil and RM1.4mil when they were launched. There was a time, before the fall of Lehman Brothers amid the global financial crisis late last September, when some of the units were sold for RM2.1mil to RM2.3mil. Prices are around RM1.8mil currently.

Ong says the pressure will be even greater when 10 Boulevard, located in the Kampung Sungai Kayu Ara area, on the way to Tropicana Golf & Country Resort, is completed. Although 10 Boulevard is not exactly in PJU, it is within the vicinity.

“That project is massive and will have an impact on PJU commercial properties, especially the shop lots in Kota Damansara,” he says.