Kuala Lumpur office rents reach record highs

Grade A office rents rose by 7.9% in Q3.

According to a JLL report, the Kuala Lumpur Grade A office rental market is witnessing significant rent growth (7.9% y-o-y) as tenants capitalise on the opportunity to relocate to technologically advanced buildings with appealing rates. 

At the same time, older buildings are losing favour among tenants due to evolving preferences and amenities.

Here’s more from JLL:

Rents in the KLC, KLF and DC submarkets have shown an increase, driven by increased tenant demand as more employees return to the office. Landlords have also reduced discounts and concessions on achievable rents, indicating a market heading towards a recovery.

Office market finds serene recovery amidst soaring demand

The recent surge in office market activity can be attributed to several factors, including the easing of COVID-19 restrictions, pent-up demand from businesses seeking to return to the office and an increase in investor confidence. Leasing activity and occupancy rates have significantly increased, pointing towards a positive market outlook.

Financial services, insurance, IT and engineering companies are driving market demand. The flight-to-quality trend is leading tenants to move to modern buildings with better amenities. While co-working spaces are gaining popularity for their flexibility, they have not yet been widely adopted on a large scale.

Stock remains unchanged

The office market is experiencing a reduction in available office space, driving vacancy rates down. With more businesses moving to high-quality new spaces, the number of available units is diminishing, resulting in a tightening market and limited options for tenants.

Tenants showed strong demand for lower-level zones in newly developed office towers, leading to a significant increase in occupancy rates. This shift in demand then moved towards higher zones with higher rents. Consequently, businesses are encouraged to consider flexible options and carefully assess lower-zone spaces in order to secure suitable office locations.

Outlook: Rising rents bolster CRE market outlook

Investor confidence in the commercial real estate market (CRE) is increasing, as demonstrated by the surge in investment activity and successful completion of multiple transactions in the quarter. This trend indicates a positive outlook and a readiness to pursue investment opportunities.

The notable rise in rents for existing office buildings contributed to the upward push in their capital values, making them more attractive for potential investors. This strengthens market sentiment and fosters growth and stability in the commercial real estate sector.

Note: Kuala Lumpur Office refers to Kuala Lumpur's Grade A office market.