Office market remains soft

Rental growth prospects continue to be challenging in KL and Selangor

an area covered by 10 municipalities surrounding Kuala Lumpur, each governed by local authorities – Kuala Lumpur City Hall, Perbadanan Putrajaya, Shah Alam City Council, Petaling Jaya City Council, Klang Municipal Council, Kajang Municipal Council, Subang Jaya Municipal Council, Selayang Municipal Council, Ampang Jaya Municipal Council and Sepang Municipal Council.

Meanwhile, Knight Frank AsiaPacific research head Nicholas Holt seems optimistic about the outlook for the office segment.

“While we are starting to feel the impact of the trade tensions flow through the Asia-Pacific office markets, sound economic conditions are expected to support office demand and drive steady rental growth across the region,” he said.

According to Knight Frank Malaysia, Kuala Lumpur saw rents decline 0.2% quarter-on-quarter, decelerating from the 0.8% fall seen previously, as the commodity sector starts to see some signs of life on sustained oil price growth and growing co-working sector.

“However, forward near-term expectations for rental growth should remain subdued as landlords are still offering packages to attract occupiers.”

Earlier this month, during Rahim & Co’s one-day seminar on the Malaysian property market titled “Where are we heading post-GE14,” Savills Malaysia executive chairman Datuk Christopher Boyd said the office sector has a large impending supply, with 20 million sq ft of space scheduled for completion by 2022.

“New supply is decelerating but vacancy rates continue to rise. Kuala Lumpur city would have the greatest impact, with 9.7 million sq ft completing in the next three to four years.”

He said market absorption in greater Kuala Lumpur has lagged over the past two years, with the absorption in 2017 being half of the space in 2013 and 2014.

“Average absorption recorded 2.5 million sq ft per annum from 2013 to 2017. This was heavily dependent on the oil and gas industry and financial services sectors. Furthermore, there were several companies relocating from old office buildings to newer ones.”

In terms of investments, Boyd said average rents are expected to see little growth, going forward.

According to Jones Lang Wootton’s in-house research, a total of 13.332 million sq ft of office space, in the form of 33 office buildings, is scheduled to be completed in the Klang Valley over the next 30 months.

Almost half of this, 6.586 million sq ft, is scheduled for completion in the second half of this year.