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August 11, 2012 | The Star | By Yvonne Tan |
TRX envisioned to be a district where ‘talent congregates and value is created’ |
IMAGINE heading towards a building in the city centre and already knowing exactly where the empty parking spaces are after merely punching some buttons on your smartphone.
Then when you leave, even during peak hours, imagine yourself cruising back home, sidestepping the infamous traffic jams Kuala Lumpur is inundated with, thanks to numerous exit points.
While it may seem like small comfort to some, urbanites will tell you how welcoming this development is. And it is but a teeny-weeny part of what the Tun Razak Exchange (TRX) aims to offer.
1Malaysia Development Bhd (1MDB) chief executive officer Datuk Shahrol Halmi points out that such technology along with features such as on-site sewerage treatment plants, an air-conditioned pedestrian network and district-scale energy efficient features within the RM26bil strategic real estate development project, is set to create a benchmark for other financial districts in Kuala Lumpur.
A wide range of international restaurants, cafes, cultural and business activities, amenities and a beautiful huge park for families to enjoy complete with the best of security aim to enhance the entire experience for even the most sophisticated individual, the head honcho of 1MDB, the master developer of TRX, says.
And, the community within TRX is set to be made up of numerous nationalities.
While detractors will argue that all this sounds too good to be true and in some way the utopian picture is, Shahrol makes a point.
“We think we have to start somewhere, the risks are all there, but it is better than doing nothing,” he tells StarBizWeek in an interview
At the risk of sounding like a commercial, he says, TRX is envisioned to be a district where “talent congregates and value is created”.
TRX which will sit on 70 acres in Jalan Tun Razak, according to preliminary plans, will comprise office buildings (48%), residence (31%), retail (10%), hospitality (10%) and institutional (1%). A total of 26 buildings, to have green certification, are expected to sit on the site.
“The message here is that we are not limiting ourselves to financial services.We are open and receptive even to support services lawyers, accountants, anybody and everybody who can basically contribute to the vibrancy and diversity of the district,” he says.
The first phase of TRX comprising a mall, apartments and a hotel, is slated to open in 2016 to coincide with the completion of the first line of the country's mass rapid transit (MRT) system. There will be four phases in total.
Thus far, there has been much interest shown in TRX from investors and companies, according to Shahrol but 1MDB is awaiting discussions with strategic investors to be completed before opening up bids for projects in the district.
The 1MDB team made visits to many countries before deciding to come up with a district that is “uniquely Malaysian.”
Visits were made to famous districts globally with large expatriate communities including to Roppongi, a district in Tokyo, London's Canary Wharf, Singapore's Marina Bay Financial Centre and various financial districts in Hong Kong.
“We incorporated only the best of these places because not all of their features are applicable here,” Shahrol says.
“For example, when I talk about families enjoying themselves in the park, that's not so suitable in our weather.
“But I told the team, we must make it happen, I was surprised to find out there is actually technology which enables rain-trees to be planted on top of our multi-level podiums... so when you are walking on top, the big trees in the park can shield you from the heat,” he says.
The buildings are also expected to incorporate wind-tunnel effects, so a simple breeze will be amplified for a cooling effect, Shahrol adds.
In Malaysia, TRX's closest comparisons would probably be the financial areas of Jalan Sultan Ismail and Jalan Raja Chulan, says Shahrol but he stresses that 1MDB is not planning to pinch companies which are already located at these locations and get them to re-locate to TRX.
“It's more of who are the new players that we can entice those who would have otherwise set up their regional centres in Hong Kong or Singapore.
“Over time, the aspiration is that there's going to be a flight of quality where by then it would make so much business sense for companies to move to TRX because of all the business there.
“That will force the rest of KL to upgrade their services... remember this is a long-term plan,” he says.
A QUESTION OF DEMAND AND SUPPLY
A BIG pipeline of commercial properties in and around the city centre itching to be launched over the next decade or so is stoking concerns by the day – will there be sufficient demand for all these buildings?
1Malaysia Development Bhd, the master developer of the massive RM26bil Tun Razak Exchange development is fully aware of such concerns.
Close to half of the TRX real estate project will comprise office buildings. The project comes along at a time when many other mammoth commercial projects such as the re-development of 926ha Rubber Research Institute (RRI) Malaysia land in Sungai Buloh and Permodalan Nasional Bhd’s proposed 100-storey Menara Warisan Merdeka are poised to take off.
Naturally, the question of oversupply is posed to the government agency.“The easy answer to such concerns is... that our interest is aligned towards making sure that there is not going to be an oversupply,” says 1MDB chief executive officer Datuk Shahrol Halmi.
“As a government agency, 1MDB is cognisant of the impression that... look, we are the Government, a 800-pound gorilla, therefore we can squeeze people (private developers) out,” he says, referring to the fact that the agency is spearheading such a big project in one of the city centre’s prime areas.
“But I ask you... is it the Government’s job to go and regulate the area of square footage that is available in the market – is that a good idea?
Is it then fair to say if there is better quality that is available on a certain side then that would be our chosen place?” he asks.
“The reality is that it is not the Government’s interest to destroy the economy of the city,” Shahrol says.
How then do we address concerns of oversupply?
“Via market researches, do studies on commercial property demand, moving forward – let market economics dictate,” he says.
Cause for Concern?
As it is now, there is already an oversupply of commercial properties in and around the city centre, according to Henry Butcher Malaysia director Lim Eng Chong.
And the figures seem to back that premise up.
International property consultant VPC director and chartered surveyor James Wong says the take-up rate for office buildings which are being built and will be completed this year stands at below 50%.
“This is for commercial properties in and around the city, but the same scenario exists further away from KL, such as in Cyberjaya; there is already an oversupply situation,” Wong says.
However, the market will tend to correct itself in time to come, he adds.
David Jarnell, senior vice-president and head of research at Malaysia’s Jones Lang Wootton writes in a recent report that this year alone, the prime office market in the city centre is expected to increase by 2.04 million sq ft with the delivery of several prime office buildings.
“The average occupancy rate in KL city centre declined from 84.9% in the fourth quarter 2011 to 81.3% in first quarter this year as the newly completed offices did not yet register any physical occupation,” he writes in his report from which an extract was published in StarBizWeek in June.
Jarnell further notes in his report that in the first quarter this year, the average net rental reduced marginally as many landlords were still maintaining the same rental rates.
Despite all of this, Henry Butcher’s Lim points out there is a saving grace.
The fact that the Government is pushing for so many economic projects as part of its larger plan to drive the country towards higher productivity and income will help attract foreign direct investments (FDIs) and congregate talents and innovators in the country.
This will inevitably produce demand for not only commercial properties but also other property types.
“The financial and economic reforms, if carried out properly, will get the intended results,” Lim says.
“The TRX project is exciting, but more than real-estate, the entire economic reform idea is a progressive one – if it is realised well, it will gel well with mega projects such as the TRX,” Lim says.
VPC’s Wong points out that in order to create effective demand for commercial properties, the country needs FDIs which will bring in the multinational corporations.
In this regard, mega projects like the TRX are needed, but with a twist.
“We need the FDIs to come but before that we need mega developments like the TRX, but with mega developments come the risk of depleting demand,” Wong says.
- Reproduced with the permission of The Star, Malaysia (thestar.com.my)