COVID-19 and Lease Term Structure: Evidence from Malaysia Commercial PropertyMarket

Abstract

This paper examines for the first time the term structure of rent for commercial properties in Kuala Lumpur, Malaysia, for the period of 2018-2023. Regression analysis reveals an upward sloping term structure, suggesting that both tenants and landlords expect the short-term lease rate to increase at the time the lease agreements were signed. The positive impact is further strengthened during the COVID-19 period, indicating that the rental market participant anticipated the recovery of the rental market from the COVID-19 pandemic period. We also find that leases with longer terms offered a lower discount compared to shorter leases during the COVID-19 period. Subsample analysis, however, reveals that these COVID-19 related findings are only applicable to the shop office submarket.