Developer selling 9 blocks of office space

An aerial view of Pusat Bandar Damansara. The nine office blocks will be built in an area that currently houses office buildings that used to have Government agencies such as the Immigration Department as tenants.

There is no shortage of takers for one million sq ft of office space coming onstream in Pusat Bandar Damansara at prices that are setting a new benchmark in the area despite the soft demand for this category of property.

Sources said the office space, spread over nine blocks and developed privately by Tan Sri Desmond Lim, has secured buyers who are in the midst of conducting their due diligence and getting the financials in place.

The offices are expected to be completed between three and four years from now and sold at an average price of RM1,500 per sq ft, which is higher than the office space in other parts of the city, including the city centre.

“Other areas fetch between RM800 and RM1,350 per sq ft. So, in some ways, the Pusat Bandar Damansara project is setting a new benchmark,” said a property consultant.

A source said the master plan had been approved but was in the midst of undergoing minor adjustments.Private previews started in the last quarter of 2014 and continued to be conducted, nevertheless, sources said.

The buyers – mainly corporates – are buying the office blocks which range from six to more than 20 storeys on a block basis.

The strong interest in this category of the property market is largely attributed to the development being sandwiched between two MRT stations, namely, Semantan and Pusat Bandar Damansara located at the Jalan Damansara-Jalan Johar-Jalan Bangsar intersection, and the strategy undertaken by the developer.

Lim is developing the site via his private vehicle, Impian Ekspresi Sdn Bhd, which is also the land owner.

Since three years ago, real estate consultants have been waving the red flag over the oversupply situation.

Lim’s strategy, said sources, was to move away from building imposing office blocks that generally comprised high-storey buildings that were normally 30 storeys and above.

“Instead, he opted to build and sell the nine blocks ranging between six storeys and more than 20 storeys. Each floor averages about 10,000 sq ft compared with some buildings in the KL city centre that have 25,000 sq ft per floor,” said a source.

Best known for developing KL Pavilion, Lim is developing the Pusat Bandar Damansara development on a 9.5-acre parcel that he won after a legal battle with Johor Corp.

Lim, subsequently, bought another 6.34 acres, the site of the former HELP Institute car park, from landowner Selangor Properties Bhd last year for RM450mil, or RM1,628 per sq ft.

With these two parcels, Lim increased his land holdings to about 18 acres, or 38% of the 46 acres situated in that area that is considered as prime.

The nine office blocks will be built in an area that currently houses office buildings that used to have Government agencies such as the Immigration Department as tenants. The current buildings are more than 30 years old and will be demolished.

Apart from the nine blocks of office buildings, Lim also has plans to build three blocks of service apartments – another one million sq ft – and an upmarket mall, which will be retained and operated by the Pavilion group. Sources said it was “very likely” the corporations were buying them for “their own use”.

“They may be scattered in various locations in the Klang Valley and have decided to consolidate in a single location. Others may be planning for future organic growth and have decided to take this opportunity, although they may not need that much of space,” a source said.

At at the end of last year, Greater KL’s total office supply totalled about 100 million sq ft, excluding those in Putrajaya and Cyberjaya, said Chris Boyd during a seminar in February in his capacity as executive chairman of property consultancy CB Richard Ellis. He is currently the executive chairman of Savills Malaysia.

About 2.93 million sq ft of office space was completed in Greater KL last year, compared with 5.15 million sq ft in 2013 due mainly to several completions in KL Sentral, Boyd said.

The National Property Information Centre’s First-Half 2014 Property Market Report had put the supply of purpose-built office space in the Klang Valley as at June 2014 at about 138 million sq ft. - By The Star