Klang Valley office rental growth to be under pressure over next two years

KUALA LUMPUR (Jan 21): Klang Valley office rental growth is expected to be under pressured owing to the new supply of 10 million sq ft coming on stream over the next two years, according to Knight Frank Malaysia Sdn Bhd managing director Sarkunan Subramaniam (pictured).

Sarkunan was speaking at the 9th Malaysian Property Summit (9MPS 2016) yesterday. The event was organised by the Association of Valuers, Property Managers, Estate Agents and Property Consultants in the private sector (PEPS). The Edge Malaysia and TheEdgeProperty.com were media partners of the event.

Overall, the Kuala Lumpur office market is expected to remain subdued this year and the tenant favoured market will continue into 2016 and beyond, said Sarkunan.

“Existing landlords of office buildings may have to put more effort to undertake asset enhancement via renovation, conversion or redevelopment to optimise returns from their properties,” he said.

He noted that there are a few successfully refurbished office buildings such as Menara Citibank, Kenanga International and Etiqa Twins. In some cases, old office buildings were converted into hotels such as Wolo Bukit Bintang (formerly Wisma KLIH) and Piccolo Hotel (formerly Wisma Peladang), and the upcoming Oasis Hotel Suites Kuala Lumpur (formerly Plaza Atrium) was converted into serviced apartments.

“As new supply come into the market, existing landlords will need to listen to their tenants’ needs and offer better facilities and maintenance service to maintain or improve occupancy levels,” he said.

According to Knight Frank’s report, there are currently 92.5 million sq ft of office space in the Klang Valley. However, 65% of the supply are Grade B and C offices, which have lower occupancy rates and rental growth.

Sarkunan noted that the occupancy rates of the most sought after Grade A and A+ office space in city area could reach about 80% to 95%.

In 2015, KL city area rental rates averaged RM6.17 psf; KL fringe area averaged RM5.70; and beyond KL area, the average rental was about RM4.19 psf.

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