KUALA LUMPUR (March 20): The shifting trend of co-working spaces may help reposition the supply and demand of office space in Malaysia, according to real estate advisory firm Savills (Malaysia) Sdn Bhd.

The firm's executive chairman Datuk Christopher Boyd explained this is because traditional office buildings which meet tenants' criteria for modern facilities, can easily be deployed as co-working space.

"It is also not aimed at just the Golden Triangle, but [office spaces] out in the suburbs and other cities such as Penang, Kuantan, Johor Bahru," Boyd said at a forum today.

Deputy executive chairman Allan Soo concurred at the forum entitled Savills Malaysia Breakfast Forum: What trends will shape real estate in 2018 and beyond?, saying it has helped alleviate the oversupply situation of the office property market.

“Today, you have medium-sized range of co-working space [tenants] that takes up starting from 20,000 sq ft to as high as 60,000 sq ft. And that’s very good, it helps with the filling up of the office buildings," Soo said. 

However, it may do little to help with rental growth as typically, tenants justify their move from an aged building to a newer one, if rents are not significantly higher, and the market supply is still challenging, he added.

For this year, Boyd expects a slight rise in vacancy rate for office buildings in the Klang Valley, and a downward pressure on rental rates before the surplus base is absorbed by 2022. 

"I think it [vacancy rate] will hover around 25% or so this year. We have about 120 million sq ft of office space, which is bigger than Singapore, and it's still going through a growth phase," Boyd added.

"But clearly, there is more space being built than is required in the short term, although the temporary vacancy is not life-threatening.

Annual absorption of office spaces stands at about three million sq ft in a good year, and one to two million sq ft in a relatively quiet year, Boyd said.