ESG principles to drive demand in office segment

Petronas Twin Towers near skyscrapers and trees under a blue sky in Kuala Lumpur, Malaysia

KUALA LUMPUR: Environmental, social and governance (ESG) principles will remain a key driver of demand for office space, mainly in Greater Kuala Lumpur, says JLL Appraisal and Property Services Sdn Bhd.

Its managing director, Jamie Tan, said the office segment experienced a surge in demand as companies increasingly relocated to modern and environmentally sustainable spaces that align with ESG principles.

“ESG is shaping the market. This shift towards sustainable and compliant spaces was driven by a growing emphasis on corporate responsibility and the need to attract and retain top talent,” he said at JLL’s fourth quarter 2023 (4Q23) Greater Kuala Lumpur Property Market Monitor yesterday.

Tan also said that in 3Q23 and 4Q23, buildings with green-certified offices were performing much better, had lower vacancy rates and experienced higher occupancy.

It witnessed a significant decrease in vacancy rates by 500 basis points, indicating strong market demand and tenant preference for sustainable buildings, compared with non-green-certified buildings which saw a modest movement of 100 basis points in vacancy rates.

He noted that office, logistics, and data centre segments would remain robust in the next 12 months, as ongoing shifts towards new supply chain principles and wider adoption of technology and sustainability would continue to fuel the growth of the segments.

“Consequently, we anticipate further rental growth for high-quality assets situated in hotspot locations that meet tenants’ expectations regarding efficiency and sustainability.

“These assets will command a premium in the market due to their attractive amenities and ability to cater to the evolving needs of occupiers such as green features,” said Tan.

Several notable developments are expected to reach completion this year which include the Lendlease office at TRX, PNB Project 1194, and CT 1@ Pavilion Damansara Heights.

For the logistics segment, the segment is expected to have about 10.5 million sq ft of warehouse space in the next three years.

Tan said the changes in the supply chain and implementation of the China Plus One concept continue to drive the demand for high-quality logistics space.

Four warehouses are expected to be completed this year, namely Axis Mega Distribution Centre Phase 2, E-Metro Logistics Park Metrohub 1, E-Metro Logistics Park Metrohub 2 and ALP Bukit Raja Omega, which would contribute 3.68 million sq ft in total. — Bernama

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