Better times expected ahead for KL office property market

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With more people returning to work, the office property market is picking up.

KUALA LUMPUR: The office property market in the Klang Valley is on course to improve further, according to a property consultant.

Knight Frank Malaysia said the pace of recovery would continue with the uptick in economic activity and improved business sentiments.

It said such positive impact had been made possible by the country’s transition to the endemic phase of Covid-19.

Senior executive director of research and consultancy at Knight Frank, Judy Ong, said despite the growing challenges in the office market, the overall occupancy rate of purpose-built office space in Kuala Lumpur city improved to 67.2% in the first half of 2022 (H1 2022) from 66% in the previous six months (H2 2021).

“Similarly, the occupational demand in KL fringe was also slightly higher at 86.8% (H2 2021: 86.1%).

“However, the overall occupancy rate in Selangor declined marginally during the review period to 74.1% from 74.6% in H2 2021,” she said in a statement.

The global property consultancy group had released its Real Estate Highlights note on the property market’s performance across the Klang Valley, Penang, Johor Bahru and Kota Kinabalu in H1 2022.

According to the report, there has been renewed interest in co-working space as it presents occupiers with the agility to upscale or downscale their operations.

“The co-working model is also attractive in terms of cost effectiveness and networking, and thus appeals to organisations of all sizes, particularly businesses that have implemented continuity plans,” it said.

Group managing director Sarkunan Subramaniam said there has been an overwhelming interest in office buildings that have been certified by Malaysian Green Technology Corporation to be utilising green technology.

These office buildings not only support the Sustainable Development Goals (SDGs) 2030 agenda, but also qualify for tax incentives.

“To further drive or retain occupancies, landlords are upgrading building specifications, prioritising health and safety as well as offering more flexible leasing arrangements,” he said.

Sarkunan noted that while demand for space is expected to increase with more employees gradually returning to the physical workplace, rental rates and occupancy levels of office buildings in the Klang Valley are expected to remain under pressure in the short term.

“This is due to the growing mismatch in supply and demand and as more organisations, especially multinational corporations, embrace the hybrid work model,” he added.