Kuala Lumpur office vacancy rate amongst the highest in APAC at 24.6% in Q1

But the market may be reaching an inflection point.

Kuala Lumpur’s prime office market continues to improve in the first quarter of 2025, as occupier activity strengthens in select sectors despite headline vacancy rates remaining elevated at 24.6%, according to Knight Frank’s latest Asia-Pacific Prime Office Rental Index for Q1 2025.

The city’s rental levels held steady at RM6.01 per square foot per month, with no quarter-on-quarter change — underscoring market resilience in the face of ongoing global and regional uncertainties. Notably, improving occupancy has been observed, bolstered by expansions from technology firms and multinational corporations aiming to reinforce their regional footprint in Malaysia.

Here’s more from Knight Frank:

“The downward trend of vacancy rates since 4Q23 implied that the office market is getting better and more resilience,” said Teh Young Khean, Senior Executive Director, Office Strategy and Solutions, Knight Frank Malaysia. “Healthy take up in the market have enhanced the performance of prime office buildings. Kuala Lumpur office market has performed better and no longer ranked as the highest vacancy rate across APAC. The stable politic and economic environment are one of the main catalyst for business expansion especially services sector.”

Keith Ooi, Group Managing Director of Knight Frank Malaysia, added, “Kuala Lumpur is well-positioned to support evolving workplace strategies, particularly as organisations explore hybrid models, cost efficiencies, and futureproofed environments. As trusted advisors, Knight Frank continues to work closely with occupiers to navigate these decisions, ensuring they maximise value in a market that is rich in opportunity.”

The report indicates that Kuala Lumpur is part of a broader Southeast Asian trend, where emerging office markets are experiencing steady gains. Tenants across the region are prioritising newer, amenity-rich buildings, and in Kuala Lumpur, this is helping to narrow the gap between available supply and actual demand.

Knight Frank also observed that although the city’s vacancy rate ranks among the highest in Asia-Pacific, it has remained unchanged quarter-on-quarter, a sign that the market may be reaching an inflection point. With limited new Grade A supply expected in the near term, the market could see a gradual tightening if demand momentum continues.

Tim Armstrong, Global Head of Occupier Strategy and Solutions at Knight Frank, commented, “As companies recalibrate their occupational strategies amid shifting global trade dynamics and economic uncertainties, the focus has turned to portfolio resilience, space efficiency, and long-term value. This evolving approach is prompting greater interest in flexible leasing models and right-sized footprints that support both cost control and workforce adaptability.”

Key indicators for Kuala Lumpur, Q1 2025: 

• Prime rent: RM6.01 psf/month (unchanged QoQ) 
• Vacancy rate: 24.6% (stable QoQ) 
• Market balance: Remains tenant-leaning 
• Demand drivers: Tech sector growth and MNC expansion

With Kuala Lumpur's office market in a period of adjustment, occupiers are urged to seize the opportunity to reposition or upgrade their space requirements. As economic and geopolitical shifts continue to reshape occupier priorities, value and flexibility are emerging as central themes in workplace strategy — and Kuala Lumpur is well positioned to respond.

The outlook for the next 12 months suggests continued stability in Malaysia’s office sector, with a tenant-favourable market environment expected to persist as businesses reassess long-term space needs and embrace more flexible, future-ready office strategies. With an annual change of 2.6% and a quarterly increase of 0.8%, Kuala Lumpur’s office market is showing signs of steady, measured recovery.

However, high supply levels and evolving workplace expectations may continue to weigh on rental growth. Occupiers are likely to prioritise flight-to-quality strategies, while landlords may focus on improving building specs and sustainability features to remain competitive in an increasingly discerning market.