Floods putting PJ’s commercial appeal, property values at risk

 The Malaysian Institute of Estate Agents says the repeated flash floods in Petaling Jaya are permanently reshaping the valuation of the city’s commercial real estate market.

Parts of Petaling Jaya were hit by flash floods for the third time this year on July 18. (Facebook pic)

PETALING JAYA:

A real estate group says recurring floods in Petaling Jaya are fundamentally affecting property prices and damaging the city’s reputation as a prime commercial hub.

Torrential rain triggered flash floods across parts of the Klang Valley last week, including parts of Petaling Jaya, some of which were inundated for the third time this year.

The Malaysian Institute of Estate Agents (MIEA) said it is “deeply concerned” by the recurrent and intensifying flood pattern, which is permanently reshaping the valuation of Petaling Jaya’s commercial real estate market.

Kelvin Yip.

MIEA president Kelvin Yip said properties that have suffered repeated flooding are seeing their capital values decline below market averages as buyers factor in repair costs and higher insurance expenses.

Ground-floor retail outlets and showrooms in Petaling Jaya are facing rental stagnation or reductions, while upper-floor units remain relatively stable, creating a two-tier market within the same building.

“This is no longer a freak occurrence but a seasonal risk factor. PJ’s reputation as a prime commercial hub is being affected,” he said.

“The current infrastructure is clearly overwhelmed, and we urge local authorities to prioritise upgrades to drainage master plans and enforce stricter development guidelines.

“High-ground and flood-resilient properties will command a ‘safety premium’ and low-lying assets will face gradual depreciation each year until infrastructure improvements catch up.”

Yip said recurring floods could lead to long-term erosion of property values as banks impose stricter loan approval criteria for commercial properties in flood-prone areas, further dampening demand.

He said multinational tenants would potentially seek flood-risk clauses in tenancy agreements, which could weaken landlords’ bargaining power.

He also pointed to changing tenant preferences, with F&B and retail operators increasingly avoiding ground-floor units in flood-prone areas, opting instead for locations with more reliable drainage systems.

Investors are prioritising properties with elevated loading bays and flood-free access roads, he said, noting that those without such features are experiencing longer vacancy periods.

Kashif Ansari.

Kashif Ansari, co-founder and group CEO of real estate firm Juwai IQI, also said the recurring floods in Petaling Jaya could significantly erode property values, citing research that a 1m increase in flood depth could reduce land values by around 45%.

Kashif said flood-prone properties typically sell at lower prices and command lower rental rates as banks tend to be more cautious about financing properties in flood-risk areas.

“Most property buyers rely on financing, making banks the ultimate arbiters of property value – and banks are typically cautious about properties located in flood zones,” he said.

“Repeated flooding is a red flag for potential commercial property buyers. Floods increase expenses, reduce rental income and erode the value of property investments.”

He said properties in affected areas such as Section 51A would likely continue trading at a discount until drainage improvements and other infrastructure upgrades are completed.

“Just look at the tenants at the flooded food court. MBPJ is offering them free rent, but they are demanding to be relocated,” he said.

Kashif said the repeated flooding was caused by development outpacing infrastructure upgrades, but could be resolved through measures such as planned drainage upgrades.

He said government efforts to strengthen flood resilience, including requirements for on-site detention tanks in new developments and increased spending on flood mitigation, showed that solutions were being developed.

Developers could also reduce risks by incorporating features such as higher ground floors in new buildings, while property owners could reduce exposure by investing in measures such as elevating critical equipment, installing flood barriers and using flood-resistant materials while waiting for wider infrastructure improvements. - FMT