Office market to remain vibrant despite influx of new supply

PETALING JAYA: The Klang Valley office market is expected to remain vibrant this year, despite the influx of new buildings which is expected to affect occupancy rates, said Knight Frank .

“Due to the influx of new buildings, particularly in TRX, occupancy rate in city is expected to decline marginally. However, rental rates will continue to hold steady as newer buildings tend to command higher rental rates,” it said in its Real Estate Highlights 2nd Half 2018 report.

The report highlighted the trend of co-working and shared services as a sweet spot in the challenging office market environment.

Labelled “space as a service”, the rising popularity of this market segment is demand driven by freelancers, start-ups and small and medium sized entrepreneurs. Knight Frank expects to see active take-up by co-working, shared services and IT related industries this year.

“Moving into 2019, occupancies in selected sub-office office markets are expected to be under pressure due to heightened competition from impending and existing office stock while rentals will continue to hold steady as newer buildings tend to command higher rates.

“We continue to observe active enquiries and leasing activities in the co-working and IT related segments. Also, an increasing number of older buildings are looking into repositioning and refurbishment to meet current occupier needs,” said Knight Frank Malaysia executive director of corporate services Teh Young Khean.

Dated but well located office buildings such as Menara Weld, Menara Standard Chartered, Menara Maxis and Menara Milenium will reportedly be undergoing repositioning/upgrading works to improve their market competitiveness in terms of rental and occupancy levels.

Knight Frank noted that the new government’s concerted efforts to implement numerous regulatory reforms will augur well for the business operating environment and this is expected to be positive for the country’s economic and property market performance over the longer term.

Looking back at 2H2018, the cumulative supply of purpose-built office space in Kuala Lumpur and Selangor stood at 103.17 million sq ft following the completion of six buildings with a combined space of 1.84 million sq ft.

In 1H2019, office buildings slated for completion include The Exchange 106, Menara Prudential, Menara Star 2, 1Powerhouse and Symphony Square.

Overall occupancy rate for Kuala Lumpur city was about 78.7% in 2H2018 compared with 79% in 1H2018. The overall occupancy rate for decentralised office locations in Kuala Lumpur fringe fell to 82.2% from 83.8% during the same period.

In Selangor, overall occupancy was slightly lower at 78.3% in 2H2018 compared with 79.2% in 1H2018.

The average rentals in Kuala Lumpur fringe and Selangor rose marginally in 2H2018 to RM5.75 psf and RM4.22 psf respectively compared with RM5.72 psf and RM4.20 psf respectively in 1H2018.

However, average rental in Kuala Lumpur city remained flat at RM7.15 psf as owners and landlords of newer office buildings offered competitive rental and attractive tenancy terms to improve take-up.

Source: The Sun Daily

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