According to locally-based experts from the commercial real estate consultancy firm DTZ, millions of square feet of office space are due to come onto the market in various parts of the Malaysian capital during 2011 and each year until at least 2015.
Dozens of multinational companies have operating bases in Kuala Lumpur and demand for office space in the city is expected to increase over the next few years but not at a rate that will keep pace with the anticipated levels of new supply.
As a result, the Malaysian market could be tough for the owners of office space but could also offer some real opportunities for businesses aiming to expand their presence in the Asia-Pacific region.
Brian Koh, executive director of DTZ’s Malaysian office, told the Star newspaper in Kuala Lumpur that: “Demand will not grow as fast as supply and this will result in a vacancy rate of 12.5 per cent this year.
“With the increase in new office space, the rate of unoccupied space is expected to go up to 15 per cent by next year.”
Meanwhile, Sarkunan Subramaniam, from Knight Frank’s local branch suggested that the office space market in the Malaysian capital is likely to remain “tenant favoured” for the foreseeable future.
Kuala Lumpur is the largest and most populous city in Malaysia, with more than seven million people living there or in its surrounding areas across the Klang Valley. The most striking landmark in the city at present is the Petronas Towers, a pair of enormous office blocks that were the two tallest buildings in the world from 1998 to 2004.
Editor’s notes: In Q1 2023, with a total stock of 140 million square feet, a vacancy rate of 28.86% and a further 19.81 million square feet in the development pipeline, the office space market in KL remains tenant-driven. It is expected that there will be downward pressure on rental rates and likely greater lease incentives for tenants.
In the first quarter of 2023, the average asking rent in Kuala Lumpur was 5.94 Malaysian Ringgit per square foot per month.
Two buildings taller than the Petronas Towers have been built in Kuala Lumpur since this article was first published – The Exchange 106 was completed in 2019 and with 95 floors, compared to the Petronas Towers’ 88 floors, was the tallest building in Malaysia from 2019 to 2022.
At the time of writing, already taller than The Exchange 106 building, is Merdeka 118 building which is due to officially complete in June 2023.
Upon completion, Merdeka 118 will have 118 floors and stand at 678.9 m (2,227 ft) making it the tallest building in Malaysia and Southeast Asia and the second-tallest in the world after the Burj Khalifa in Dubai.
The Merdeka 118 is a mixed-use building comprised of a mall, restaurants and the Park Hyatt Kuala Lumpur.
The Merdeka 118 will also offer 1 million sq ft of Grade-A office space for lease and has been chosen as the headquarter offices of Permodalan Nasional Berhad (PNB) which is one of the largest fund management companies in Malaysia.