Many people used to regard Kampung Kerinchi as a squatter area. As development spread into the area in the 1990s, some squatters’ homes were demolished to make way for the development of low-cost flats and medium-cost apartments by Kuala Lumpur City Hall (DBKL).
According to Amy Wong, director of research and consultancy at Savills Malaysia Sdn Bhd, Kampung Kerinchi was founded in the 1870s by Abdullah Hukum, an Indonesian from Kerinchi in West Sumatra.
The UOA Group purchased more than 60 acres of land in 2005, which began the transformation of Kampung Kerinchi into what it is today. It built Bangsar South, a mixed-use development with commercial, hospitality, and residential components that has attracted middle- to upper-middle-income buyers as well as multinational corporations and local businesses to set up shop.
According to Rahim & Co International Sdn Bhd director of research Sulaiman Saheh, rental activities in Kampung Kerinchi have flourished as a result of a significant boost from Bangsar South. The presence of Grade A office towers and several retail and food and beverage establishments in the immediate vicinity has transformed the area into a thriving mixed-use development hub.
“This is further enhanced by the presence of the Universiti and Kerinchi LRT stations, as well as the Pantai Dalam KTM station.” It is also easily accessible via the Federal Highway, Sprint Highway, and New Pantai Expressway,” he adds.
Consistent rental demand
Sulaiman observes that residential property rents in Kampung Kerinchi have remained stable, with demand driven by the quality of the accommodation, facilities, and amenities, as well as the location’s ease of access from the Kuala Lumpur city centre, Petaling Jaya, Shah Alam, and Klang. Because of its proximity to the University of Malaya, the area has become a popular choice of residence for students looking for rental housing.
According to Wong, the average rental performance in Kampung Kerinchi has generally remained stable, increasing marginally from RM2.52 psf in 2019 to RM2.56 psf in 2020, a 1.74% year on year increase (y-o-y).
She adds that the rental market for residential properties in Kampung Kerinchi has been performing well. “This is due to the strong pull factor of expatriate presence and local talents working in corporate office towers, which directly create housing demand for units in the area.”
Rents for open market high-rise residential units remained stable year on year, according to Napic data, while units in affordable high-rise residential schemes, such as the Residensi Kerinchi and Angkasapuri low-cost flats, showed positive movement during the same period.
“The average rent at Residensi Kerinchi increased from RM1.65 per square foot in 2019 to RM1.80 per square foot in 2020, while the average rent at the Angkasapuri low-cost flats increased from RM1.60 per square foot to RM1.80 per square foot,” Wong says.
With the increasing popularity of Kampung Kerinchi as a hot rental market, including the established Bangsar South development, potential buyers would include those looking to purchase a residence there for investment purposes, as a rental home, or for their own use, according to Sulaiman.
“With more new developments on the way and a growing community, Kampung Kerinchi has a bright future as a modern transit-oriented development (TOD) of today.”
“It is strategically located along the KL City-Bangsar-Petaling Jaya conurbation,” he continues.
“The revitalization exercise in Kampung Kerinchi has made the area so liveable that the outlook in terms of investment returns and liveability is promising.” Furthermore, the area is equipped with leisure venues and commercial office buildings, which will supplement the nearby housing demand,” says Wong.
Sulaiman also expects more people to buy and rent units in the area as new developments enter the market to meet rising buyer and renter demand. “The upcoming MRT station proposed as part of the upcoming Pantai Sentral Park township adjacent to Bangsar South adds even more potential to the area.” However, as more units are offered and expected to be completed in the coming years, there is increased competition for tenants and buyers.”
According to Rahim & Co data, units with built-ups of 400 to 2,097 sq ft in Novum @ South Bangsar, Camellia Serviced Suites, Southview Residence, KL Gateway Residences, Residensi Kerinchi, and The Park Residences command monthly rents ranging from RM1,200 to RM6,800, yielding 3% to 6.5% per annum.
Sulaiman observes that while the actual rents for closed deals have remained stable during the pandemic, the market’s asking rents have corrected. “Prices for residential properties in the area have also corrected, but they have remained generally stagnant due to sustained demand.” Currently, rental yields in the area range from 3% to 5% per year, with some properties reaching 6%, depending on the initial investment.”
The expansion of Kampung Kerinchi and Bangsar South can be seen as a natural progression or spillover from the expansion of the city outskirts, to Bangsar, and towards Petaling Jaya. “The gap filled by Kampung Kerinchi and its surroundings complements the nearby established Mid Valley City and KL Eco City, among others.” These have contributed to the area’s market attractiveness, whether in the rental or sales markets, among investors and tenants,” says Sulaiman.
Commercial tenants will appreciate the location.
Sulaiman believes that the commercial segment is dominated by corporate office tenants and those looking for office space outside of the central business district but still wanting to be connected within the larger golden triangle of the city centre, Petaling Jaya, and Bangsar.
According to him, the transformed Kampung Kerinchi has become a destination for commercial tenants because of its existing residential base, which has been upgraded alongside the newer commercial developments. “From more low-end and organic residential offerings in the beginning, it has now expanded to include affordable and high-end homes.” As a result, the area’s offices and shops will have access to a more diverse pool of potential consumers and employees, including expatriates, and may follow the trends seen in Mont’Kiara and Bangsar.”
Although the majority of the area’s purpose-built offices (PBOs) are strata-titled, they have been able to attract strong brands and established corporates due to a proper tenancy mix controlled by the building owners and well-managed common areas that set a benchmark corporate office image for the buildings, according to Wong.
As a result, these factors will contribute to differentiating the rental rates from traditional strata offices, which command less than the RM5.10 psf mark.
The average asking rent for The Horizon, The Vertical Business Suites, The Vertical Corporate Tower, UOA Corporate Tower, Menara Suezcap 1 and Menara Suezcap 2 ranges from RM4.50 to RM6.10 psf per month, according to Savills Research data.
“The rents have been competitive, with asking prices exceeding RM5 per square foot.” Smaller start-ups or small and medium-sized businesses can choose the smaller office unit plates at Menara Suezcap 2, which have an average rent of RM4.50 per square foot. According to Wong, “the office blocks at The Horizon saw transactions ranging from RM3.20 to RM6.90 psf per month, with an average rent of RM5.10 psf.”
Regardless of the current economic situation, Sulaiman believes that Kampung Kerinchi has the potential to grow further due to its popularity as a rental destination. “However, as we have seen in recent years, commercial demand has been under constant pressure as a result of high supply but stagnant demand.” It has been difficult for both developers and commercial building operators to find new and innovative ways to attract tenants in a highly competitive market.”
With the new norm of working remotely and the sharing economy model of co-working spaces, the suburbanization of offices and commercial centres that began about 15 years ago may be accelerated.
“Having commercial hubs close to the talent pool’s residence reduces travel time and has advantages.” “More competitive rents in these out-of-city urban centres with comparable facilities and quality to those in the city area could attract local and foreign companies,” says Sulaiman.
However, as with any other developing/redeveloping area, progress may be hampered if rapid growth and gentrification are not reined in to ensure a balance of supply and demand.
“The market remains challenging, and even after we overcome the pandemic, we will face the underlying challenge of supply and demand mismatches, employment- and income-related challenges, as well as geopolitical concerns.” To avoid an unsustainable bubble effect, growth should be carefully nurtured to be in line with market demand,” he says.
Wong believes that Kampung Kerinchi’s magnetic pull will be in integrated developments that play an integral part in the overall ecosystem of work, live, and play. The corporate office tower cluster will generate demand for the surrounding residential towers and will be supported by retail malls in one location, making it a self-sustaining locality, with a spillover effect on areas such as Pantai Dalam.
According to Wong, rents for both residential and commercial properties in Kampung Kerinchi will likely remain stable in the medium term, with the ability to cushion the negative impact of Covid-19.
“The large impending supply in the Greater KL property and commercial sector has slowed overall rental growth.” Similarly, the planned supply of high-rise residential units and office buildings will almost certainly cause rents to rise gradually but steadily following a period of economic recovery. This, however, will take place over time until economic conditions improve in the future.”
source from TheEdgeMarkets