Retail, office sectors will top investments in 2018

PETALING JAYA: Commercial real estate investors will continue to invest in the retail sector despite the oversupplied market, a commercial real estate investment sentiment survey done by Knight Frank Research revealed.
The survey targeted key players in commercial property, namely developers (56%), fund/REIT managers (24%) and commercial lenders (20%), to grasp their sentiment in real estate investment.
It showed that despite unfavourable market sentiment towards the retail sub-sector, all respondents intend to deploy more capital, citing opportunities available. For example, embarking on various asset enhancement initiatives will improve the competitiveness of their retail assets.
Surprisingly, the office market, which is also viewed unfavourably, is also expected to generate much attention from developers and lenders, with the exception of fund/REIT managers, who plan to limit exposure in this sub-sector mainly due to the oversupply situation that will inevitably place downward pressure towards rental yields of office properties.
The survey concluded that retail and office sub-sectors are expected to continue generating the most interest in 2018 despite their unfavourable outlook, due to the two sub-sectors generally having higher development values.
As for the hotel/leisure sub-sector, lenders plan to retain a similar exposure in 2018, whereas developers are expected to deploy more capital into this sub-sector. However, fund/REIT managers will limit their exposure to this sub-sector in 2018.
Developers’ plan to invest more in the hotel/leisure comes at a time where the tourism sector in Malaysia remains strong.
Hence, this sub-sector acts as a logical avenue for developers to diversify beyond the weakening office and retail sub-sectors, which used to be the highly coveted sub-sectors for developers.
Fund/REIT managers plan to limit their exposure towards the hotel/leisure sub-sector as they prefer to invest in the logistics/industrial sub-sector, due to higher yields and brighter prospects supported by the rise in e-commerce.
Logistics/industrial and healthcare/institutional sub-sectors will garner more attention from fund/REIT managers and lenders while developers remain on the sideline.
Besides that, the retail sub-sector is also better liked by fund / REIT managers although they will be more selective in the future.