Siva Shanker: The incoming floor space will undoubtedly exacerbate an already challenging market dynamic.
PETALING JAYA: Despite the persisting office space glut, especially in the Klang Valley, experts believe the sector is on the path to recovery.
Rahim & Co International Sdn Bhd director of real estate agency Siva Shanker said a general change in working culture and trends, especially since the Covid-19 pandemic, has been driving the Klang Valley office market.
“The working-from-home trend is ending. More people are coming back. Many were hot-desking, but that’s changing. The streets are more crowded than ever now. Demand for office space is coming back,” he told StarBiz.
Siva noted the “crowded streets” have resulted in a pick-up in demand for office space in areas that are “less crowded.”
“We’re seeing lower occupancy rates in the city centre (averaging between 50% and 60%) compared with the suburbs (which are at 70% to 90%).
“More people are preferring to work in the suburbs to avoid the traffic jams. Rents are also cheaper, and amenities have improved in these locations.”
Additionally, Siva said offices located within integrated developments are becoming increasingly popular.
“Locations such as Mid Valley City, KL Sentral, Bangsar South and KL Eco City have been seeing growing demand for office space.
“These integrated developments are vibrant and full of life. People also like working in these locations because the buildings are newer compared with those in the city centre.”
Savills Malaysia Sdn Bhd group managing director Datuk Paul Khong said the office market has been performing well, with a strong “flight to quality” trend emerging over the past 24 months.
“Many companies are relocating to green buildings to align with their environmental, social and governance (ESG) agendas and net-zero carbon journeys.
“This has been a boon for new, higher-grade office spaces, while older buildings face challenges that require major capital expenditure for refurbishments to stay relevant and competitive,” he said.
Siva concurred that there has been a growing “flight to quality” and “flight to green” buildings.
“For green buildings, we’re seeing it more among the multinational corporations (MNCs) and not so much among the Malaysia companies.
“For these MNCs, they want buildings that are ESG-compliant or green-certified. Or else, they won’t even look at it. All of this has been driving the Klang Valley office sector,” he said.
With the growing trend towards better quality and green-compliant offices, older ones are ending up empty.
Siva noted that owners of older buildings are left in a quandary on whether to renovate, or to repurpose.
“A lot of office buildings have been repurposed into hotels. But sometimes, retro-fitting them is not viable. This is because a lot of money is spent and it also takes a lot of time to rent it out as a hotel.”
Siva said sometimes, refurbishing a building can change everything.
“Just by refurbishing the lobby, you can already make an impression the moment people step through the door. It’s all about perception.
“Fix it first before the tenant comes and give them that feel-good factor instead of only choosing to fix it after they come. This way, you will have a better chance of closing the deal.”
Moreover, Siva said tenants have become increasingly rent-sensitive.
“Sometimes, charging just 50 sen more can kill the deal. No point charging RM7 per sq ft and then having it empty.
“Better to charge RM6.50 per sq ft and have some level of occupancy,” he said.
According to Knight Frank in its latest Real Estate Highlights report, as of the second half of 2025 (2H25), cumulative office supply stood at 120.6 million sq ft – having increased by almost 1.3 million sq ft during the review period.
“KL (Kuala Lumpur) City saw no new completions in 2H25, while KL fringe area recorded the completion of Menara TNB Bangsar and Selangor saw the handover of Sunway Square Corporate Tower 1 and Sunsuria Forum.
“The completion of these projects provides a timely, measured addition to decentralised office options – offering larger, more efficient floorplates that may appeal to corporates seeking cost optimisation outside the KL City, particularly as occupiers reassess spatial needs and prioritise value-driven locations.”
Following 2.4 million sq ft of completions in 2025, Knight Frank said the development pipeline is set to remain active in 2026, with around 2.8 million sq ft of additional supply anticipated.
“Menara Golden Eagle in KL City is expected to complete in 1H26, with delivery momentum expected to pick up in 2H26,” it said.
In terms of demand, Knight Frank said occupancy rates in the Klang Valley showed a mixed but generally stable trend during 2H25, influenced by selective completions and ongoing corporate activity.
“KL City recorded a modest rise to 70.4% (1H25: 69.1%), while the KL Fringe area and Selangor edged slightly lower to 88.3% and 72.8%, respectively (1H25: 89.4% and 74.4%), due to the recent completions of Menara TNB Bangsar, Sunway Square Corporate Tower 1 and Sunsuria Forum.”
Knight Frank said KL City rents rose to RM 6.73 per sq ft per month (1H25: from RM 6.69 per sq ft), underpinned by continued interest in Grade A buildings with connectivity and quality specifications.
Meanwhile, the KL Fringe area saw average rents increase to RM 5.83 per sq ft per month (1H25: RM 5.81 per sq ft), partly reflecting the recent completion of Menara TNB Bangsar, alongside sustained demand in established hubs such as Mid Valley and KL Eco City, where limited vacancies and tenant retention have allowed landlords to maintain or lift asking rents.
In Selangor, Knight Frank said average rents rose to RM4.29 per sq ft per month (1H25: RM4.24 per sq ft), reflecting the addition of new, large-scale developments such as Sunway Square Corporate Towers, as broader decentralised stock remained largely stable.
