Kuala Lumpur's office occupancy rate at a record low of 69.1% in 2H 2020

Occupational demand in the KL Fringe was also under pressure at 85.8%.

The cumulative supply of office space in Klang Valley stood at circa 109.5 million sq ft as of 2H2020 following the completion of Menara TCM in KL City and Menara Star 2 @ Pacific Star in Selangor.

Located at the intersection of Jalan Tun Razak and Persiaran Stonor, Knight Frank says the 32-storey Menara TCM was completed in November 2020. The GBI and LEED Gold certified office building offers circa 372,000 sq ft net lettable area (NLA) space and 745 car parking bays. Its typical floor plates are sized from 14,200 sq ft to 15,800 sq ft.

Menara Star 2 forms part of the larger mixed-use development of Pacific Star in Seksyen 13 of Petaling Jaya. The latter comprises two office towers, three condominium blocks and a retail podium with a total of 1,875 car parking bays. The 14-storey GBI certified office tower offers circa 251,000 sq ft NLA and comes with typical floor plates of 8,700 sq ft to 14,000 sq ft and slab to ceiling height from 3.8m to 5.5m.

Here’s more from Knight Frank:

By 1H2021, 12 office buildings are scheduled for completion with nine located in KL City and the remaining three in Selangor. Upcoming completions in the city are Affin Tower and HSBC Tower, both in TRX; The Stride Strata Office, TS Law Tower, UOB Tower 2, Permata Sapura, Menara Great Eastern 2, Legasi Kampong Bharu and Plaza Conlay @ Conlay 301 while in Selangor, they are HCK Tower @ Empire City, Quill 9 Annex and Imazium @ Uptown. Collectively, these completions will add circa 4.9 million sq ft of space to the existing cumulative office supply.

Amid growing challenges in the office market, the overall occupancy rate of purpose-built office space in KL City dipped further to record at 69.1% as of 2H2020(p) (1H2020: 69.8%). Similarly, the occupational demand in KL Fringe was also under pressure during the review period and was analysed at 85.8% (1H2020: 86.2%). The overall occupancy rate in Selangor dropped to 77.9% as well during the same period of time (1H2020: 78.4%).

There were several notable office related announcements during the review period.

Following delays arising from the implementation of various stages of MCO, Phases 1 and 2 of the Merdeka 118 project are expected to be ready by 2Q2022 instead of end 2021. Phase 1 of the development involves the Merdeka 118 office tower and surrounding infrastructure. As of October 2020, the tower is 60% completed with the concrete core structure at its peak (Level 118) and the tower facade at Level 82. Upon completion, it will be Malaysia's tallest building and the second tallest tower in the world as well as the first building in Malaysia to satisfy the triple green building platinum accreditations locally and internationally, namely the Green Building Index (GBI), the Green Real Estate (GreenRE), and the Leadership in Energy and Environmental Design (LEED).

The construction of Phase 1 of Bandar Malaysia is expected to commence by June next year, with the kicking off of infrastructure works. In the first phase spanning across 20.23 hectares, there will be several Grade A office towers, hotels, serviced apartments, and luxury residences, which will be developed over four years. Phase 1 of Bandar Malaysia will house more than 12 world-class towers with total gross floor area (GFA) exceeding 12 million sq ft. Estimated to generate a GDV of over RM200 billion, the prime national economic project is expected to resuscitate and jumpstart the Malaysian economy.

Sunsuria Bhd, via the acquisition of shares in Bumilex Construction Sdn Bhd, plans to develop two plots of land along Lorong Tuanku Abdul Rahman measuring about 0.47 hectare in total into a high-rise mixed commercial project known as Nadi @ TAR. The project has an estimated GDV of RM524.8 million and will feature seven storeys of retail space, 22 storeys of office suites, a 10-level parking lot as well as three storeys of office space with a multi-purpose hall and one storey of retail space. The construction is set to commence in 2H2021 and scheduled for completion by the end of 2025.

KLCC Real Estate Investment Trust (REIT) had, in November, announced the extension of leases with Petroliam Nasional Bhd (Petronas). The extended leases of the office space within Menara 3 Petronas and Petronas Twin Towers will be for a further term of 15 years upon the expiry of the current term, which is 14 December 2026 for Menara 3 Petronas and 30 September 2027 for Petronas Twin Towers. The rental amounts would be determined prior to the commencement of the extended leases. Currently, Petronas is paying circa RM9.00 per sq ft per month and RM11.00 per sq ft per month for Menara 3 Petronas and Petronas Twin Towers respectively.

KL33 Properties had unveiled the first ‘Covid Secure’ office space at Menara KL33 in August 2020. A first-of-its-kind in Malaysia, the fully furnished ‘Covid Secure’ office space are specifically reconfigured and retrofitted according to the one-metre physical distancing rule to prioritise the safety, health and wellbeing of occupants and tenants. Along with the refurbishment, KL33 Properties has also introduced ‘Easy Lease Programme’ to help companies to bring their workforce back to office safely without the exorbitant initial set-up costs.

Following the disposal to Techvance Properties Management Sdn Bhd in 2015, the 13-storey premises of AmBank Group Leadership Centre at Jalan P Ramlee, is being redeveloped and repositioned into a 180-room hotel. The 26-storey hotel, which will operate as Hotel Indigo Kuala Lumpur on the Park in partnership with InterContinental Hotels Group (IHG), is scheduled to open by 2023.

The Jewel, one of the final components of the i-City development, will house an international 5-star hotel and state-of-the art Grade A office. The 70-storey skyscraper is set to be the tallest building in Shah Alam when completed by 2025. The master development of i-City is a 72-acre freehold ultrapolis located along the Federal Highway. The project, with a gross development value (GDV) of more than RM10 billion, comprises corporate towers, cyber office suites, serviced residences, hotels, data centres, a convention centre, and the Central i-City shopping centre.