Office rental rates in KL city centre fall on oversupply

Knight Frank Malaysia executive director of corporate services Teh Young Khean said office rental rates in KL city remained “under pressure”, with property owners competing to attract new occupiers and retain existing tenants.

PETALING JAYA: Office rental rates in the Kuala Lumpur city centre fell 0.2% in the second quarter of the year due to oversupply and difficulty in attracting new tenants, according to Knight Frank’s Asia-Pacific prime office rental index.

KL is one of the 20 cities tracked by the index.

Knight Frank Malaysia executive director of corporate services Teh Young Khean said office rental rates in KL city remained “under pressure”, with property owners competing to attract new occupiers and retain existing tenants.

“Office rents in the Kuala Lumpur city centre saw a marginal decline in the second quarter of 2019.

“Faced with the high impending office supply driven by new construction, prime grade office rents in KL continue to be under pressure, ” he added.

Despite increasing headwinds, Knight Frank’s Asia-Pacific prime office rental index showed that 14 cities recorded either stable or increased rents compared with 15 cities in 1Q19, reflecting that most markets remain stable.

Overall, it said the office market rents across the Asia-Pacific region recovered slightly in 2Q19, increasing 0.9% quarter-on-quarter (q-o-q) and reversing the decline seen in 1Q19. “Most office markets in the Asia-Pacific remained stable or saw growth: Sydney saw a 1.3% growth and Singapore registered a 0.9% prime office rental growth, while Hong Kong (-1.0%) and Shanghai (-1.1%) both saw declines in the past quarter, ” said property consultant Knight Frank.

Of all the markets, it said Tokyo recorded the highest rise of 6.9% q-o-q, mainly due to limited supply of prime office space.

Knight Frank’s head of research for Asia-Pacific Nicholas Holt expected the rest of 2019 to be a challenging period for the Asia-Pacific office sector, given the US-China trade war, uncertainties surrounding Brexit and Hong Kong.

“As we cross into the second half of 2019, we maintain our muted growth expectations with rents expected to end the year flat, down from 2018’s 7.7% rise, ” he added.