KUALA LUMPUR, Jan 27 — The number of vacant office spaces in the Klang Valley continued to grow at an alarming rate throughout 2021 even as the lifting of Covid-19 curbs allowed the economy to reopen, surpassing 150 million square feet despite a slowing appetite for businesses to expand.

Rahim&Co, one of the country’s largest property consultancies, said the glut in commercial spaces has heightened concern over the "sustainability” of that market segment, although it stopped short of suggesting the risk of a property bubble arising from the overhang.

Klang Valley’s occupancy rate at the first half of last year was at 72.1 per cent, falling further from the 75.4 per cent rate recorded from the same period in 2020, making total vacant commercial space in the region at 41 million square foot, or close to a thousand acres.

"On the commercial segment, challenges in tenancy performance and rental levels carried on into 2021 as incoming supply continued despite demand still being shaken up by the pandemic,” the firm said in a statement to accompany its 2021/2022 property market review.

"This has heightened the level of concern felt on the sustainability of such market capacity when put together against the demand pace that has slowly declined over the years.”

Among factors causing the glut is the rise of remote working, the firm noted, a phenomenon precipitated by Covid-19.

The same problem has beset malls and retail spaces. Fear of the coronavirus, the closure of international borders and the rapid growth of e-commerce had driven foot traffic down at a time when consumers were already staying away from the malls and warming up to the idea of online shopping.

National occupancy rate in the first half of 2021 declined by 2 per cent to 76.6 per cent or double the rate from the previous period, according to Rahim&Co’s data.

Retail spaces take up rate in the Klang Valley also posted a 1 per cent decline year-on-year.

Of the existing retail complex space in the valley, 14.7 million from the 73.6 million square feet are still vacant, with the numbers expected to be exponentially higher once under construction malls or retail complexes are ready to open.

"It is still uncertain if the market’s absorption rate will be able to keep up with the large injection of new supply as with the pandemic still present in 2021 and 2022,” the firm said in its review of retail property sector performance in the capital city.

"Existing tenants are having to re-strategize their business position in order to cope with the losses faced and new tenants having a wider choice of malls to choose from due to a highly competitive environment,” it added.

Still, foot traffic at major malls improved "significantly” in the second half of 2021, especially during public holidays,according to its data.

But there are lingering concerns about the emergence of new variants of the coronavirus, the firm said as it suggested the possibility of foot traffic slumping if the rate of cases continues to climb.