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Malaysia property market has experienced a drastic change in 2008. The property market moved from a boom at the end of 2007 to uncertainties due to increasing construction cost. Finally, the property market moved into a relatively quiet market towards the end of 2008. With all the banks trying to tighten their loan terms, obtaining loans for development of all types of commercial building have been difficult in the last three years.
Yet, study shows that there is still a high demand for space in office building in area like Kuala Lumpur. From time to time, there are several developments of new office buildings in Klang Valley area. From the study done by JPPH, there is an increase of approximately 10 million square metres of new office space throughout Kuala Lumpur. Yet, the average vacancy rate in office space decreased to 18.6%. This proved that the demand for office building is still able to cater the increase in new office space. Study also showed that there is a new supply of approximately 280,000 square metres of new office space and additional 92,000 square metres of office being refurbished and repositioned in the year of 2009. So, building owners have to struggle to maintain the popularity and the competitiveness of their building. The current lack of new-build development raises the likelihood of grade-A supply shortages when the occupier market returns, creating investment opportunities for carefully targeted refurbishment.
But, usually owner is in great dilemma when they are in such situation. As everyone know, the refurbishment of office space offers advantages over new-build which can facilitate the achievement of economic, social and environmental sustainability. But, redevelopment is the ultimate solution for eliminating all problems regarding the maintenance, changing tenants requirement and other probems.
Making comparisons between refurbishment and redevelopment is also problematic because the term refurbishment can be used to encompass a wide spectrum of building works, from minor cosmetic improvements through to extensive reconstruction. But, in the majority of cases, refurbishment will be a quicker and cheaper means of restoring second-hand office space to grade-A specification. As a low-cost option, the refurbishment of office space should be intuitively attractive in an economic climate marked by a lack of development finance. But in many cases refurbishment is as costly as redevelopment and likely to carry with it greater risks and physical constraints.
The respondents of the questionnaire are limited to tenants in Golden Triangle area only. As for the property manager, all property managers can be chosen as the interviewee. Building manager who are hired by owners and acted on behalf of them, will gives their opinions in owner perspectives (maximise profit) and current tenants will voice out their preferences in choosing a building space.
Primary data includes questionnaire, samplings, interviews and case study. In this study, respondents identified in questionnaire study are selected property manager who represents building ownerâ€™s point of view and some tenants within Golden Triangle area through sampling. As for interview session, interviewees targeted are property manager who are the representatives of building owners. Through this interview sessions, benefit of building refurbishment and redevelopment will be ascertained. Finally, case study of three similar office buildings will also be done as the quantitative analysis. All three building will be compared according to the cost incurred for construction and the benefit obtained. Then the differences in term of occupancy rates, rental and others will be calculated to represent the increment in term of market value.