Why Accreditation of Green Building Certification is one of the criteria

With the purpose of obtaining the MSC Malaysia Cybercentre status, designated building should comply with the Qualifying Criteria as well as the MSC Malaysia Cybercity/Cybercentre Performance Standards outlined by Multimedia Development Corporation (MDeC). Qualifying Criteria, or specifically referred as the MSC Malaysia Qualifying Criteria are basically the core elements as well as the niche value proposition that the building owner should deliver in pursuing the MSC Malaysia initiatives of realising the vision for Malaysia to be a preferred global ICT hub, which also includes to provide a conducive and enabling environment for companies to conduct their business operation. For instance, requirement to set up the Incubation Business Centre (IBC) is one of the efforts toward achieving this objective.

In contrast, the performance standards, otherwise known as MSC Malaysia Cybercity/Cybercentre Performance Standard, is the physical readiness that the designated building need to comply with. There are seven parameters listed in the performance standard which are:

1. Infostructure
2. Electricity supply
3. Water supply
4. Transportation
5. Natural environment
6. Safety & security
7. Customer service quality

Building that have been accredited with Green Building certification from local or international standards such as GBI (Malaysia), Green Mark (Singapore) or LEED (United States) would automatically comply with the fifth parameter in the performance standard. Hence, this will ease the process of being a dual-compliant (MSC status and green certified) building in the effort of being more marketable and consequently increase the occupancy rate of the building designated. Alternatively, building that have not been accredited with the Green Building certification can still pursue the proposal of obtaining the MSC status or also known as MSC compliant or MSC Cybercity / Cybercentre status by developing its own Environmental Management Plan (EMP) or Environmental Policy which is endorsed by the management of the designated building.

Building owner that seek to move towards realising the aim of being dual-compliant building would have an advantage in securing valuable prospect as the building would obtain superiority among other building in attracting potential tenants. Otherwise, normal building would only be depending on the rental and occupancy rate. 

As published in The Edge Malaysia, Sarkunan Subramaniam, managing director of Knight Frank Malaysia cited that "However, with the impending high supply of space in the city centre and city fringe, it is inevitable that there will be mounting pressure on occupancy and rental rates as the gap between supply and demands widens." 

Since at present the surplus of office space owing to the supply-demand mismatch fairly worrying, being exceptional appear to be indispensable. Concisely, by being a dual-compliant building, it is not only have the advantage of attracting prospective tenants, the building would also secure other benefits such as entitles to a set of incentives, rights and privileges, namely the MSC Malaysia Bill of Guarantees (BoGs) from the Government of Malaysia.

For further details on what is BoGs, visit http://www.mscmalaysia.my/news/introducing-msc-malaysia-certified-solutions

Too much office space in The Klang Valley?

It is reparted that the average occupancy of office space in Klang Valley today is about 75%. Oversupply situation is an issue that affects the take up rate even in Grade A building. Giving building with additional standards or features will definitely increase the attractiveness and provides value-add to potential tenants and investors. Designate building as MSC Malaysia Cybercentre designated building/premise is one of the solution.

The Star - June 1, 2013

SERENA Yeong of Essel Properties has been an office market specialist for the Klang Valley the last 12 years. She is aware of the hike in office space come 2015/2016.

“We can still make a living when companies migrate from old buildings to new ones. Owners of older buildings will be worried, though,” she says.

Landlords of older buildings are already feeling the heat, offering several months of free rent and more car parking bays. It is a tenant’s market in the Klang Valley. Property professionals highlighted the situation as far back as two years ago.

Last year, founder and executive chairman Datuk Abdul Rahim Rahman called for prudence and suggested the imposition of stricter rules when granting development permits to curb overbuilding, which results in congestion, in the Klang Valley. The problem of city congestion has resulted in companies relocating to fringe city locations and suburban area with some form of public transport connectivity. For sectors like banking and oil and gas, this may not be possible.

Property consultancy Jones Lang Wootton drew attention to the office stock in March when senior vice-president and head of research said the supply of office space – prime and secondary stock – in the Klang Valley had surpassed 100 million sq ft.

He called it “a historic milestone”. Saying the situation was “manageable”, he nevertheless cautioned this could lead to a consolidation of rental levels for the rest of the year.

In the last quarter of 2012, seven office buildings in the Golden Triangle bordered by Jalan Ampang, Jalan Sultan Ismail and Jalan Raja Chulan, the decentralised area of KL Sentral in Bangsar Pantai, Petaling Jaya and Putrajaya, totalling 2.23 million sq ft, were issued with certificates of completion and compliance. Accumulated office stock rose to 100.694 million sq ft.

Jarnell also compared the Klang Valley with metropolitan areas of Bangkok, Singapoore and Jakarta. Greater Bangkok has the second-highest office stock, totalling 87.85 million sq ft, followed by the Special Capital Region of Jakarta with 65.66 million sq ft. Singapore’s office stock is slightly less than Jakarta at 64.01 million sq ft.

Greater Bangkok’s population is 8.2 million, Jakarta 10 million and Singapore about 5.1 million. The Klang Valley has a population of about 7.2 milion.

The fact that Bangkok and Jakarta have more people but 12 million sq ft and 34 million sq ft office space less respectively is something to think about. Singapore also has about a third of office space less. Has the Klang Valley over-built?

Don’t call it glut

Six out of eight property professionals are reluctant to use the word “glut” as it is “far too simplistic”.

“The issue is not whether there is a glut or not; the issue is there are increasingly more prime office space entering the market and this is affecting the rental market,” says Elvin Fernandez, managing director of group of companies.

He says in order for a free market to work, it is best to make known the facts regarding the office market to the various stakeholders and the public.

“Only then can the market correct itself,” he says.

How did the Klang Valley get into this situation?

Jones Lang Wootton attributes the strong supply growth to steady and sustainable economic growth, a vastly growing services sector and integrated mixed use developments, and improvement in the public transport system when the light rail transit (LRT) came into service in the mid- to late-1990s.

Office stock has grown at an average of 3.62 million sq ft per annum since 1998, Jarnell says. The average annual take-up rate is 1.5 million to 2 million sq ft, another consultant says.

Simply put, as new buildings enter the market, tenants moved from the old to the new, leaving the former vacant.

Greater Kuala Lumpur or the Klang Valley’s office market is not a homogenous one. It is a tapestry comprising different sizes, locations, green versus prime grade A stock, and older buildings. The prime office market has splintered into different sub-segments - the normal grade A, grade A plus and super prime category. Certified green buildings may fall into any of these.

The lack of focus on redevelopment – some quarters call it regeneration – may have lent itself to today’s massive office market. Instead of leaving pockets of green here and there, the easier route – and the more profitable one for both developers and the local authorities – seems to be building new offices.

That does not mean regeneration or refurbishment have not been carried out successfully. The Intermark is a result of redevelopment of what was then the Empire Tower, City Square, Crown Princess and Plaza Ampang in 2007 by an Australian-based fund MGPA. Another successful refurbishment is Menara , previously Shahzan Insas Tower by of Singapore.

executive director Brian Koh: “Most of the buildings coming up today are Grade A which means that most of them are in Kuala Lumpur. But the oversupply situation is an issue that affects the office space market across the board.

“It is a concern to landlords and those in the property profession given that occupancy is likely to go downward because of oversupply. Landlords will have to give more competitive terms to tenants which will affect their bottomline.

“It also affects the banking and finance sector because banks are funding the development and construction of these properties. That means the banking sector will have to be more cautious and there may need to be restraints on funding,” Koh says.

Size and locality are not the only defining qualities of office buildings which come with varying degrees of “greenness” and technological features known as MSC (multimedia super corridor) status.

The range of offices available is as diverse as its rental per sq ft. Office space rental is priced as low as 87 sen per sq ft in Kampung Baru to RM12 per sq ft at the Twin Towers in the , according to property websites. There is a huge middle segment priced between RM4 and RM6 per sq ft available in prime locations like Damansara Heights, Mid Valley, Petaling Jaya and in the Ampang area.

It is this diversity that makes it difficult to tar the sector with one stroke that a glut exists.

A property website estimated that office rental rates have dropped by between 20% and 25%. Buildings in the category of G Tower, a green building, used to be RM8-RM8.50 per sq ft initially. A property consultant says buildings in the same category may be rented out at RM6.50-RM7 per sq ft effectively with rent-free incentive for a few months.

Regeneration Vs new projects

James Goh says there are three issues – excess space, old buildings that do not meet international standards and rental pressure. The general office yield today is 6%. Some put it at between 6.5% and 7% net for average grade A buildings.

“Landlords need to bite the bullet and upgrade or risk becoming obsolete,” he says. “Landlords have to accept the new market reality. Those who adapt quickly will fill up their buildings faster,” says Goh.

Twin Towers are fully occupied, Menara Maxis is about 90% occupied but some KL downtown offices priced at above RM7 per sq ft are half filled.
Says Serena Yeong of Essel Properties: “There are many downtown buildings that are struggling. There is a lot of migration to outside KL city.” This accounts for the 80%-90% occupancy enjoyed in Bangsar South, Petaling Jaya and Subang Jaya.

The average occupancy level today in the Klang Valley is about 75%. Anything below that should set off warning bells.

If the various mega projects announced by the Government were to go ahead, the amount of space is expected to swell further. Among which are the Tun Razak Exchange, KL Metropolis area near the , the former Pudu prison redevelopment and Bandar Malaysia in Sg Besi. KL Sentral, a government-initiated project, is almost complete.

How much is enough?

In a nation striving for developed nation status and building liveable cities, how much is enough?

There is no straight-forward answer, because unlike Britain, where the London mayor’s office regulates developments, in the Klang Valley, approval is given by the local authorites based on compliance with by-laws, and not according to demand and supply and market feasibility studies.

“So lenders have to be the ‘regulators’ because they are funding the projects. In the past, insists applications for project financing come with market and feasibility studies but this has changed. There is no property regulatory body to oversee developments based on demand and supply, how much space is needed and over what period of time,” says a property consultant who declined to be named.

This may be one of the reasons contributing to the Klang Valley’s burgeoning developments far exceeding neighbouring cities like Singapore, Jakarta and Bangkok.

Property consultant chief operating officer Tang Chee Meng says: “This is an area of concern as the potential increase in supply of office space from these mega projects is significant and will lead to an oversupply situation, unless the Government can attract overseas companies to take up the additional space.

“At the current projected pace of economic growth, it is unlikely the normal organic growth in demand for office space can take up the additional space being created by these mega projects.”

It is part of the Government’s plans to attract 100 of the world’s largest multinationals from the Fortune 500 or Forbes Global 2000 to invest in Greater KL by 2020.

As important as developments that meet international standards may be, it takes more than bricks and mortar to attract investments and people to Kuala Lumpur. There are factors such as the city’s liveability and infrastructure, which includes both public transport and utility needs, security, green and open space, air quality, to name a few.

Location branding

There are certain sectors of the economy that need the branding that a city location offers. Sectors such as financial services (banks, insurance, fund management) and oil and gas may need to remain in the city.

Professional services such as accounting, architectural, engineering, valuation and real estate may prefer to decentralise to take advantage of lower rents or better transportation links and less traffic congestion.

Accenture and international law firm , which is part of Baker & McKenzie International, are today in the Mid Valley Mega Mall area while British Telecoms has expanded to KL Sentral, says .

Head hunters and Michael Page International may be in the city because of their clientele. Data centres may want to be in Cyberjaya because of the MSC status, although that is now possible outside Cyberjaya, says Lau.

“When a company chooses a location, factors under consideration includes branding, perception, budget and talent retention. Sg Buloh will not be an address for a multinational company, but it could be the back office for a bank,” she says.

Consultants polled say the emphasis on development changed more than a decade ago with the entry of the government versus entrepreneur-style private sector. Among them being for KL Sentral, (1MDB) for the Tun Razak Exchange, group, and . The ones leaning towards commercial developments would be MRCB, 1MDB and PNB.

Says Koh of DTZ Nawawi Tie Leung: “(It goes back to) risk management by the respective stakeholders. Unlike Singapore, where the government releases land as and when needed to control the property market, we don’t have that sort of mechanism. So the banking sector has to come in because they are the ones financing the projects.”

MSC Malaysia Cybercity / Cybercentre Designation

MSC Malaysia Cybercity and Cybercentre status is a prestigious recognition given to preferred and conducive business locations that meets the MSC Malaysia Qualifying Criteria as well as the MSC Malaysia Performance Standards in deliverance of MSC Malaysia Bill of Guarantees to MSC Malaysia Status Companies. The designation is awarded by the Federal Government through the ministry agency, Multimedia Development Corporation (MDeC) to house MSC Malaysia status companies.

In previous years, under the Mininistry of Science, Technology and Innovation (MOSTI), Datuk Seri Dr Maximus Johnity Ongkili, in his speech said the rollout of MSC Malaysia Cybercities and Cybercentres is aimed at ensuring that our country will benefit from the economic growth driven by ICT initiatives. Currently, there are now 30 MSC Malaysia Cybercities and Cybercentres nationwide.

In order for building owner or developer, who seek to being conferred with the MSC Malaysia Cybercity and Cybercentre designation and allow MSC Status Company to enjoy the 10-point Bill of Guarantees, an expert who knows in depth on what are the requirements and criteria required by such designation would be crucial. Upnamics Sdn Bhd is one of the trusted expert that is able to provide consultancy in order to obtain the MSC Malaysia Cybercity and Cybercentre designation.

 ABOUT THE COMPANY

 UPNAMICS Sdn Bhd (446045-V) is a wholly-owned Bumiputra private limited company, formed by bumiputra entrepreneurs that have extensive experience in MSC Malaysia initiatives. The organisation carry its business vision to be a premier ICT solution provider and infrastructure/infostructure provider in developing premier business environment and location while promoting the pervasive use of ICT and proven solution and technology. 

 As part of our ongoing effort in developing premier business location, we are providing consultancy services in designating MSC Malaysia Cybercity / Cybercentre as well as the management of Cybercity / Cybercentre after the status is obtained. 

 OUR ACHIEVEMENT

 We have been entrusted and actively involved with in designating 5 new MSC Malaysia Cybercentre in Klang Valley as well as providing consultancy and advisory services in managing an existing MSC Malaysia Cybercentre located in Jalan Bukit Bintang.

 We believe that with our extensive experience in MSC initiative and existing projects, we would be able to facilitate and deliver the designation of MSC Malaysia Cybercity and Cybercentre in various locations, as efforts to support the MSC Malaysia initiatives and to meet the needs of office space by MSC Status companies.

 HOW TO REACH US

 If you are interested or have any enquiries pertaining to MSC Malaysia Cybercity and Cybercentre consultancy service, you can give a call at 03-2164 2918 or write your enquiries and send it to  upnamics@gmail.com. You can also drop by our office at No. 1 , Level 1, Menara Worldwide ,Jalan Bukit Bintang and we would be more than happy to entertain your enquiries.