PETALING JAYA: The office market in Johor is expected to see a gradual recovery, as occupancy levels improve.
Olive Tree Property Consultants founder and chief executive officer Samuel Tan noted that Johor Baru is being positioned as an international city.
“The office sector must grow in tandem. The current average occupancy rate is about 60% to 75% with significant variations depending on the location, building quality and tenant-mix.
“With the refurbishment and repurposing, we anticipate the occupancy to increase to 70% and above,” he told StarBiz.
Tan said Grade A premium offices in Medini and the Johor Baru city centre can draw an occupancy rate of between 70% to 85% due to their modern facilities and location.
“Older buildings and those in secondary offices can attract between 50% to 60%.
“Purpose-built office buildings in Wisma Sunway are showing an exceptional performance. Major tenants include the Iskandar Regional Development Authority and more. Medini 9 also attracts good tenants. It is all a question of positioning of the buildings.”
To revitalise the Johor Baru office market, Tan said a combination of demand-side incentives, supply-side adjustments and policy intervention is needed.
“The ways of repurposing of obsolete office spaces include converting them into co-working, student housing, targeting demand from Singaporean workers and students at the education hub.
“They can be turned into hybrid co-working hubs partnering with specialists in this field to create flexible workspaces for small and medium enterprises and freelancers,” Tan said.
Meanwhile, property consultants Knight Frank in its Real Estate Highlights report for the first half of this year said newer buildings are likely to benefit from positive spillover from the Johor-Singapore Special Economic Zone, as well as ongoing infrastructure upgrades and other government-led initiatives.
However, it said no major influx of new supply is anticipated in the near term, reducing the risk of further downward pressure on occupancy.
“In the current environment of relatively soft rental and occupancy levels, repurposing underutilised office spaces may offer an interim income strategy.
“Alternative uses such as showrooms, fitness studios, bridal boutiques, event venues, or healthcare-related facilities (for example medical suites, wellness centres, or rehab clinics) could help improve overall building utilisation.”
To spur occupancy rates, Tan said tax breaks can be offered to multinational companies and start-ups or firms setting up regional offices in Johor Baru.
“Subsidised rental for strategic sectors such as fintech, digital nomads and healthcare firms with below-market rents for the first few years can be given.
“Additionally, an anchor-tenant programme could lure major companies to occupy a full building.”
Tan said old buildings need to be upgraded to improve their quality and amenities.
“The owners must retrofit their buildings with pro-green initiatives to obtain certifications that can appeal to environmental, social and governance-conscious tenants.
“These include solar panels and energy-efficient heating, ventilation and air conditioning, among others.”
Tan also said shared facilities like rooftop gardens, food and beverage outlets and gyms can make older buildings competitive.
“Connectivity such as 5G and Wi-Fi 6 infrastructure are critical for tech firms and hybrid workers.”
According to Knight Frank, the cumulative supply of selected office space in Johor Baru stood at about 7.5 million square feet as of the first half of this year (1H25), reflecting an annual increase of 7.9% compared with 6.9 million square feet in 1H24.
“The supply has remained unchanged since 2H24,” it said.
Knight Frank said the average occupancy rate for office space was stable at about 48.7% in 1H25.
“During the review period, the average asking rental rates for office space in Johor Baru and Iskandar Puteri generally increased. In the city centre, older buildings have gradually begun to increase their rental rates, driven by the positive reception and higher asking rents for newer buildings.
“Landlords of older buildings are adjusting their rates upward to remain competitive, while still offering a relatively affordable alternative.”
Knight Frank said, in Iskandar Puteri, landlords are increasingly optimistic about the local office market, supported by healthy demand and a gradually declining vacancy rate.
“As a result, rental-rate expectations are on the rise.
“We observed an increasing presence of appointment-based businesses in office buildings, likely attracted by the comparatively lower rental rates.
“This trend supports the diversification of office space usage, especially considering the relatively low occupancy rates across existing office supply.”
