Malaysia Building Glut Feared
KUALA LUMPUR, Malaysia (AP) _ Filling the city’s skyline, skyscrapers have been Malaysia’s most visible sign of growth for decades. Now they increasingly represent the dark cloud of an economic slowdown.
In Kuala Lumpur and its suburbs, tall buildings sprouted as developers built based on a growth rate averaging 8 percent over the last decade, adding more offices, hotels, shopping malls and upscale housing.
Now, a glut of buildings appears imminent.
``The builders are calling 1998 a year of consolidation, which is a euphemism for slowdown,″ said Ravindra Dass, executive chairman of Dass, Mohamad, Chartwell, real estate valuers and agents.
The slump of more than 40 percent in the value of the Malaysian currency, the ringgit, has put brakes on the economy, forcing the cancellation of many grandiose plans such as a $4 billion, 6.5 mile-long, 10-story Linear City, advertised as the world’s longest building.
Also put on hold have been Putrajaya, a new federal capital close to Kuala Lumpur, a huge hydroelectric dam on the island of Borneo, and a new international airport in northern Malaysia.
The building boom had been driven mostly by get-rich-quick visions and healthy economic projections. As recently as October, Malaysia said its economy would keep growing briskly. But with the ringgit falling steadily, Finance Minister Anwar Ibrahim slashed the growth estimates two months later to 4 percent to 5 percent. The International Monetary Fund is more pessimistic, predicting 2.5 percent.
As stock markets tumbled wildly and the ringgit fell, banks raised interest rates, clamping down on expensive developments and saying loans will be made mostly for low-cost housing.
Then this month, with the unemployment rate of 2.5 percent rising, the government said it might expel more than half the 1.8 million foreign workers living in the country to give Malaysians priority for jobs.
The construction sector _ where about 80 percent of the 700,000 workers are foreign _ would be worst-hit, said Chan Kok Eng, a professor of geography at University Malaya.
So the future looks gloomy for the building frenzy that came as Malaysia leapt from a rural economy based on palm oil, rubber and tin to a rich manufacturing and trading nation in less than 20 years.
The boom created the Petronas Towers _ currently the world’s tallest building at 1,483 feet _ and the building sector transacted business worth 49 billion ringgit ($10 billion) last year, the equivalent of 21 percent of Malaysia’s Gross National Product.
The worst likely to be affected by the days ahead will be the office sector, where the low occupancy rates are sure to end, realtors and developers say.
There is an estimated 37 million square feet of available office space in Kuala Lumpur and immediate suburbs, 90 percent of it currently occupied. Another 20 million square feet, or nearly 40 buildings over 30 stories tall, had been slated for development between 1998 and 2002.
If built, that would create almost 70 million square feet in total supply.
``We are going to be staring at an oversupply of 15 million square feet soon,″ Dass said. The last time there was a recession in the late 1980s, builders were left 6 million square feet of office space. ``It took until 1992 to mop that up,″ he said.
However builders are more optimistic about the residential sector, despite the burgeoning condominiums.
``The shortfall of more than 80,000 housing units, including condominium units, cannot suddenly turn into a blinding glut just because of a downturn,″ said Michael Yam chief of Sunrise Berhad, a large building company.
Oversupply in the retail sector could worsen as people spend less money and sprawling shopping malls become not so profitable. The existing 14 million square feet of shopping area was projected to grow to 20 million square feet by the year 2000.
``If there is no problem with employment, then the residential sector will stay above board, otherwise, there will be a total collapse,″ Dass predicted.