Institutional investors ready to pounce on property

KUALA LUMPUR: Institutional investors may be in for bargains in the property sector, as tightly held assets are expected to come on the market due to challenging business conditions, said Malaysian Institute of Estate Agents immediate past president Siva Shanker.
He said the big institutional players, funds and real estate investment trusts (REITs) will now be on the lookout for good properties that may appear on the market as the economic situation gets tougher.
"There will be a lot of players who are a little bit cash-tight now, so they will have to decide between saving the business or saving the property and they will always choose to save the business. They may put some properties into the market and that would be available at better yields then," he told SunBiz.
Siva said previously unavailable properties and properties that were available but with unfavourable yields are now being offered at more realistic prices with matching yields as sellers are now willing to lower prices to more reasonable levels.
"A lot of retail investors are a little bit spooked but I think the institutional investors will pounce. They will see this as an opportunity because they are longer-term players, thus they are less easily spooked," he said.
Siva expects the trend to continue in the second half of 2016 and into the first half of 2017.
According to Knight Frank's Real Estate Highlights, several offices were sold or have been put up for sale since the second half of 2015. These include Menara Hong Leong (Office Tower A), Menara Shell and AmBank Group Leadership Centre. YNL Properties Sdn Bhd, the owner of an office building in Jalan Raja Chulan, was acquired by Stone Master Corp Bhd for RM15 million.
In the first half of 2016, Tropicana Plaza Sdn Bhd announced plans to sell Dijaya Plaza, while Encorp Bhd sold a block (Block P) of office suites within Garden Office @ Encorp Strand in Kota Damansara, Selangor, to Koperasi Permodalan Felda Malaysia Bhd for RM27 million.
"I think the big players have got good cash reserves and they are okay. It is the medium/middle guys who are suffering a bit. So as more of them start to feel the pinch, I think they would put some of their properties into the market to try and ease their cash flow, and that's when the big funds will take up.
"I think there should be some good transactions in the next one to two years," he said.
Siva said both local and foreign funds will be looking to invest, as the long-term outlook for Malaysia is good.
However, the outlook for the overall property market is less optimistic with expectations of negative growth in the first half of 2016 and a flat year in 2017.
"I thought we will find our level again in the second half of 2016 and hopefully we start improving a little bit in 2017 and 2018 but I don't think that's going to happen anymore because news (of investigations into funds allegedly originating from 1Malaysia Development Bhd) has now broken," he said.
"I previously said the market would probably pick up in 2017 or 2018. We don't know what's going to happen, so let's wait for the next six months to pan out. Based on this ... the 2017/2018 growth that I predicted is not going to happen. It's going to be pushed back even later. I find 2017 will be a flat year now."