KUALA LUMPUR: The influx of multinational companies seeking regional headquarters in Kuala Lumpur (KL) is contributing to a more competitive office landscape, according to Knight Frank.
Knight Frank Malaysia executive director of office strategy and solutions Teh Young Khean said the global property consultancy remained positive on the office market outlook, with notable multinational companies expanding and setting up business in Malaysia, especially Kuala Lumpur.
In a statement, Teh attributed the trend to Kuala Lumpur’s competitive real estate costs and welcoming business environment.
"Despite higher vacancy rates among Asia-Pacific region, KL city continues to show steady signs of improved occupancy rate and rental rates of prime grade buildings from quarter-to-quarter (q-o-q),” he said.
The Knight Frank’s Asia-Pacific Prime Office Rental Index for the third quarter of 2024 (3Q 2024) revealed that prime office rents in Asia-Pacific are stabilising, falling 0.1 per cent q-o-q, suggesting a potential bottoming out of the market.
It noted that the trend is supported by growth in the Indian markets, which exhibit strong and sustained demand from offshoring operations and domestic businesses.
According to the report, 16 out of the 23 monitored cities reported stable or increasing rents year-on-year (y-o-y), up from 15 in 2Q 2024, with rents declining 2.5 per cent y-o-y, an improvement from the 2.8 per cent drop observed in 2Q 2024.
Global head of occupier strategy and solutions Tim Armstrong noted that global economic uncertainties have led to more cautious capital expenditure strategies among occupiers, favouring renewals and consolidating office footprints.
"When relocations do occur, companies are opting for smaller, higher-density spaces, aligning with cost mitigation needs and the growing acceptance of hybrid work models.
"While the business sentiment may improve as the United States Federal Reserve eases monetary policy, demand will continue to be tempered by prudent spending and workplace strategies focused on maximising space utilisation,” he said.
However, he said that as the region’s development peak subsides, any significant uptick in leasing activity could rapidly tighten the availability of prime spaces.
He added that the scenario may accelerate the flight-to-quality trend as tenants seek to upgrade their portfolios in a potentially more competitive market. - Bernama
