The expanded SST applies to commercial properties including offices, shopping malls, shop lots, and warehouses for landlords with annual revenue exceeding RM1 million.

Figure 1: Key exemptions included in the recently announced SST expansion

While landlords face less direct impact, their operating expenses will increase due to the expanded SST scope. Buildings with higher vacancy rates, whether new or old, will likely be more sensitive to these changes, compelling owners to offer more favourable terms to attract tenants. However, government landlords gain a competitive edge through their tax-exempt status.

Developers face compressed profit margins as construction costs rise. The combined effect of higher costs and tenant resistance creates significant pressure. Many developers may pivot toward shorter timeline projects or postpone larger developments.

Township developers will likely pass costs to buyers, while commercial and industrial segments face challenges implementing similar strategies. Developers of properties currently under construction face both increased costs and potentially weaker demand.

The real estate investment landscape requires adjustment as landlord revenue growth projections decrease. REITs and investors must account for these changes in their valuation models, with yields likely experiencing slight compression. Property management expenses are simultaneously rising due to higher electricity tariffs, minimum wage increases, and SST on various services.