Office Space


Resilience of Kuala Lumpur commercial office market was clearly illustrated by the fairly sustained performances in 2017 with a slight increase in occupancy and rental rates remaining mostly stable amid fears of glut and completion of a number of office buildings in 2017 which adds further to existing excess supply. Prime buildings in strategic locations continue to perform well with good occupancy and rental rates.

According to NAPIC’s 2017 Property Market Report, the existing supply of purpose-built office space in Greater Kuala Lumpur as of 2017 stands at approximately 158.34 million sqft with an average occupancy at 80.92%, a slight increase from 79.6% recorded last year. KL City Centre accounts for 46.8% (74.14 mil sqft. from 324 buildings) of the total supply while 13.8% (21.78 mil sqft. from 117 buildings) comes from Outside KL City Centre (OKLCC). The remaining 39.4% are from WP Putrajaya and Selangor.

Kuala Lumpur commercial office market remained healthy in 2017 with better occupancy rate than in 2016 despite completion of new office buildings and a cautious oil and gas industry. Overall occupancy of Kuala Lumpur office market was at 80% (KL City Centre: 82%; OKLCC: 73.2%), improved from 77.9% recorded in 2016 (KL City Centre: 80%; OKLCC: 67%).

Kuala Lumpur office market reported commendable annual space take-up in 2017 at approximately 4.092 million sqft, a substantial improvement from 265,050 sqft take-up in 2016. The significant take-up was associated with the good performance of occupancy rate for new completions and pertinent tenant entries in several purpose-built office buildings.

13 new purpose-built office buildings with a total space of approximately 3.651 million sqft saw completion in Kuala Lumpur in 2017. Notable buildings that was completed include:

Table 1: Notable Purpose-built Office Building Construction Completions in 2017

Source: JPPH 2017 Property Market Report and Zerin Properties Research

Greater Kuala Lumpur’s office market is set to receive millions of square feet in new office space over the next several years, with the completion of mega projects like Tun Razak Exchange (TRX), 118-storey Menara Warisan Merdeka and Bandar Malaysia.

With about more than 10 million new square feet expected to be available in Greater Kuala Lumpur by 2019, inventory is expected to outstrip demand. The existing inventory already exceeded the supply in regional cities such as Singapore, Bangkok and Jakarta. This, coupled with the prevailing challenging economic environment, could create unique challenges for owners of buildings that were built more than 15 years ago. At present, approximately 70% of existing office space supply in Kuala Lumpur City originates from older buildings that are more than 15 years old.

The Ministry of Federal Territories has recently announced the tightening of approval for the construction of new office buildings in Kuala Lumpur, with the exception of corporate buildings constructed for owners’ occupation to control the escalating supply and stabilise the office market. This is expected to augur well with Greater Kuala Lumpur commercial office market as the current overhang in the sector will be reduced and landlords will have better negotiating powers.

Table 2: Significant Projects Planned & Under Construction in Kuala Lumpur
Source: Zerin Properties Research

Rental rates continued to be stable despite downward pressure. Investment grade buildings in good locations with close proximity or within city transit hub are amongst those with competitive edge and fetched higher rental. However, attractive tenant incentives are readily available for major space users, especially at newly completed buildings.

Prime rental ranges between RM7 – RM13 per sqft For KL City, Petronas Twin Towers. (Tower 2) led the sub-sector with the highest rental ranging between RM9.00 per sqft and RM13.00 per sqft. On the contrary, Menara TH Platinum, Menara Standard Chartered and Menara Weld showed a slight decline between 5.0% and 7.5% for its selected levels. As at Q4 2017, the Purpose-Built Office Rental Index for Kuala Lumpur stood at 133.6 points, up by 2.7% from 130.1 points in Q4 2016.

The completion of the two Light Rail Transit (LRT) extensions (18.1km Ampang Line LRT extension & 17.4km Kelana Jaya line extension) as well as the completion of the Sungai Buloh-Kajang MRT Line has enhanced the marketability of offices in the Decentralized Areas particularly within Damansara Heights due to improved connectivity.

There were several significant office leasing transactions in 2017, majority of which took place within office buildings in Kuala Lumpur. The following Table 3 and Table 4 shows the notable office leasing and rental rates in selected purpose-built office buildings in Kuala Lumpur.

Table 3: Notable Office Leasing in Kuala Lumpur
Table 4: Rental Rates in Selected Purpose-Built Office Buildings in Kuala Lumpur

Source: JPPH 2017 Property Market Report and Zerin Properties Research

The purpose-built office segment saw a number of prominent transactions in Kuala Lumpur for the year 2017 and early 2018. Major benchmark sales include Wisma Mont Kiara@RM670 per sqft, Menara Prudential @RM759 per sqft, Vista Tower @ RM824 per sqft and Wisma Selangor Dredging @ RM1,323 per sqft. Prime strata office projects continued to be launched with prices ranging from RM898 to RM2,000 per sqft, and selective good sale responses reported including the Oxley Towers, Bukit Bintang City Centre (BBCC), and The Met 8 at KL Metropolis. The following Table 5 shows the notable transactions that took place in recent times.

Table 5: Major Office Transaction

Source: JPPH 2017 Property Market Report and Zerin Research

2018 will be another challenging year for the commercial office market mainly due to the oversupply of office space in the market, exacerbated by ageing buildings. Some owners chose to convert the old buildings to other uses as they are not willing to bear the risk of doing major renovation only to fail to lease it out post-refurbishment at the rate they want. Campbell Complex building changed its usage to a budget hotel for its Level 13 to 19 and currently undergoing renovation. Ambank Group Leadership Centre also changed its usage to hotel.

Amid widening mismatch between supply and demand, landlords are stepping up their marketing efforts to improve occupancy levels while being more flexible in negotiations in this tenant-led market. Landlords will be proactive by offering more incentives such as longer rent free periods, more flexible air conditioning and car park allocation to retain existing tenants and attract new tenants.

There will be increasing preferences for office developments within integrated developments for next generation of employees and office buildings within prime location with good connectivity, high accessibility to LRTs or MRTs. There is also growing preference for larger floorplates to accommodate the open plan ‘work smart concept’ or ‘hot desking concept.

As there is a growing trend of ‘flight to quality and value’ by tenants, demand for well-located, good grade, dual-compliant office buildings is expected to remain firm. Dual-compliant buildings that come with MSC status and green accreditation may continue to be in good demand. Also, demand for office space in the Klang Valley may come from those who are attracted to developments offering various incentives by the government and the buildings along the mass rapid transit routes such as Tun Razak Exchange development.

The improving oil and gas sector may provide a breather for the office market moving forward. There are a few catalysts that may help boost the market, such as the boom in e-commerce and the completion of the first MRT line. The e-commerce industry is on an expansion mode and this industry is considered the savior for the market in 2018. The completion of the upcoming MRT lines will be significant for the industry as it enhances the marketability of office spaces due to improved connectivity. is aimed at promoting the awareness of Commercial Office Real Estate and our website shares common goals, with the sharing of accurate and timely information that enhances the likelihood of making the right decision at the right time. Frequent updating of vacancies is practiced and the information provided is reflective of current scenarios.



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