KUALA LUMPUR: The Asia-Pacific office market encountered significant challenges in 2024, with prime office rents declining by 1.6% for the year—an improvement from the 2.4% drop recorded in 2023.
However, some markets demonstrated resilience, as 16 out of 23 monitored cities saw stable or rising rents, notably in Australia and Japan, according to Knight Frank Asia-Pacific Q4 2024 Office Highlights.
Knight Frank, in a statement, said Malaysia’s office market, particularly in Kuala Lumpur, remained competitive in 2024, with key Grade A buildings in prime locations continuing to attract strong occupier demand.
The flight-to-quality trend saw corporate tenants prioritising office spaces with superior amenities and sustainability features, helping to stabilise occupancy levels despite an overall subdued rental environment.
It noted that premium Grade A offices, especially in Kuala Lumpur, attracted many multinational companies, while landlords upgraded older buildings, enhanced sustainability features, and offered competitive leases to address rising vacancies.
"While we continue to see challenges in the broader Asia-Pacific region, Kuala Lumpur’s office market remains dynamic despite recording a vast vacancy rate compared to other countries in the Asia-Pacific region. This presents a good opportunity for tenants to upgrade or reconfigure their office spaces to align with the latest trends for employment growth sustainability and talent retention.
“Overall occupancy rate and rental rates have shown slight uptick due to positive take up in KL City Centre especially Tun Razak Exchange (TRX)," Knight Frank Malaysia senior executive director of office strategy & solutions Teh Young Khean said.
Despite some pressure on rents, prime Grade A office buildings in key areas like Mid Valley City, KL Eco City, KL Sentral, Bangsar South, and Tun Razak Exchange remain attractive to new occupiers and businesses consolidating operations.
It added that Malaysia’s stable economic outlook further supports market performance by driving business expansion and employment growth.
Knight Frank Malaysia group managing director Keith Ooi said the Malaysian office market is transforming, with workplace quality and sustainability emerging as top considerations for occupiers.
“While landlords face increasing competition, those that proactively invest in improving their buildings and offering greater flexibility in lease structures will remain competitive.
“Looking ahead, we anticipate demand for high-quality office space to persist, particularly from businesses prioritising ESG (Environmental, Social, and Governance) objectives and employee well-being,” Ooi said.
Looking ahead, Malaysia’s office market will continue to evolve in response to changing occupier needs and broader economic trends. While challenges such as supply overhang and competition from newer developments persist, opportunities exist for landlords willing to differentiate their offerings.
Knight Frank said as businesses focus on optimising office spaces to support hybrid work models and enhance employee experience, Kuala Lumpur’s prime office segment is expected to remain a focal point for both domestic and international occupiers. With the right strategies, Malaysia’s office market is well-positioned to navigate headwinds and unlock new growth opportunities in 2025.
Meanwhile, Asia-Pacific’s office market is expected to undergo significant transformations in 2025, with prime Grade A office space increasing by 7%, up from 4% in 2024.
More than 40% of this new supply will be delivered to mainland Chinese markets, which remain under pressure due to economic headwinds.
