How Kuala Lumpur’s office market experienced a robust recovery

Find out which sectors drove the demand.

The KL office market underwent a robust recovery according to a JLL report, with the positive trend continuing following a significant increase in net absorption in the fourth quarter of 2023. 

“Occupancy rates and investor confidence all displayed an upward trajectory, indicating sustained growth and demand for office spaces. The ongoing positive momentum was remarkable and signified a favourable outlook for the office sector,” the report added.

Here’s more from JLL:

Financial services, insurance, IT and oil companies drove activity in the KL office market. These sectors played a crucial role in generating demand for office spaces, demonstrating their resilience and expansion plans. Tenants preferred high-quality office spaces, and flex space solutions gained popularity. Co-working spaces saw tenant expansion, and operators sought flexible options.

Vacant new completion and delays impact future projects

The latest addition to the market in the quarter was CT 5 @ Pavilion Damansara Heights, situated in the thriving KL Fringe submarket. This building offers a spacious 94,000 sq ft of space, making it an attractive location for businesses seeking prime office space in the area.

ESG-compliant spaces have higher demand than non-certified ones, reflecting the growing preference for sustainable and socially responsible buildings. This is driving an increasing supply of ESG-certified spaces and poses challenges for traditional spaces.

Dynamic rent growth observed in KLC and KLF submarkets

Demand-driven rent increases were observed in the quarter, with Kuala Lumpur (KLF) and Kuala Lumpur City (KLC) experiencing the highest upticks. Tenants are seizing the opportunity to relocate to newer, technologically-advanced buildings offering attractive rents.

Limited supply due to project delays, and the introduction of modern, ESG-compliant buildings like Menara Exchange 106 in TRX, drove rent growth. New sustainable spaces commanded higher rates, while older CBD buildings faced increased vacancies, leading to downward pressure on rents.

Outlook: Thriving office sector in KLC and KLF submarkets

The Kuala Lumpur office market is forecast to continue its robust recovery and sustain positive momentum, particularly in the KLC and KLF submarkets. These submarkets, known for their demand from financial services, insurance, IT and oil companies, are expected to play a significant role in driving the market’s positive trajectory.

Key factors contributing to the market outlook include the preference for high-quality office spaces, the growing utilisation of flex space solutions, and the anticipated completion of delayed projects. Rent increases and tightening vacancy rates in certain submarkets further reinforce the positive market trajectory.

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