Kuala Lumpur remains one of the most competitive office locations in Asia and with more than one million square feet of new office space for the next three years, average rental rates are expected to remain stable, said one leading property firm.
Over the next three years, more than nine million square feet of new supply is expected to be launched. Average rents for Grade A office space have bounced back to RM7 (S$2.86) per square feet (psf), after a 15 percent decline for most of 2009. This was achieved despite the 4.76 million square feet of new office space added from 14 office buildings, said Chris Boyd, the executive chairman of CBRE Malaysia.
By the end of last year, vacancy rates had stabilized at 13 percent because many of the new supplies were non-speculative and substantially pre-let prior to completion.
CBRE Malaysia does not consider the additional office supply as excessive, but a “tenant’s market is expected to prevail” in the short-term.
According to Mr. Boyd, Kuala Lumpur is now appearing back on the scene of many international investors and was the reason behind the establishment of a CBRE office in Malaysia.
“We have received more and more enquiries from international investors,” said Mr. Boyd, adding that KL’s quality facilities, modern infrastructure and comparatively cheap rental rates will attract more investors.
The company expects an increase of demand from different sectors this year after last year’s liberalization of foreign equity ownership rules. Mr. Boyd is confident that further liberalization of the economy will attract more foreign and local investors, although the RM3.5 billion from 28 major commercial transactions in H2 2009 involved mostly Malaysians.
The government has hinted that the new economic model, which will be announced next month, could remove the restraints that hold back the country’s competitiveness, which could encourage private investors to invest in the local economy rather than overseas.
As of end-2009, KL offices’ average transaction price was 14 percent lower at RM814 psf from RM950 psf in 2008. The values of office capital are expected to remain stable between RM800 psf and RM1,200 psf.
Currently, Kuala Lumpur has an estimated Grade A office space of 29.9 million square feet.