Malaysian offices on the outskirts of Kuala Lumpur are thriving while demand remained subdued in the city centre.
According to the latest research from real estate firm JLL in its Asia-Pacific Property Digest, negative absorption was seen in central KL as landlords of old buildings struggled to secure new tenants for vacated space.
Tenants were drawn further afield and some of the newest buildings in the submarket gained almost full occupancy.
The picture was very different in Kuala Lumpur where most of the newer buildings were more than half vacant.
NO NEW SUPPLY
No new supply came on stream in either the KL or the submarkets in 2Q, and the completion of Menara JKG was delayed again, JLL noted.
Overall the vacancy rate increased to 12 percent in 2Q 16 due to negative absorption in the KL submarket.
However this was somewhat mitigated by positive absorption in the suburban areas.
MIXED RENTAL PERFORMANCE
Average net rents of Malaysian offices in central KL decreased 0.7 percent quarter-on-quarter while suburban areas showed a diverging trend with net rents increasing 0.2 percent.
In central KL rents for top-grade office buildings were generally stable, but for lower grade office buildings they continued to slide.
Investment yields were flat compared to the previous quarter and JLL anticipates they will remain relatively stable as interest rates in Malaysia are expected to remain unchanged but with some downside potential.
OUTLOOK: TENANTS’ MARKET AMID WEAK SENTIMENT
JLL said it does not foresee a significant impact on the office leasing market as a result of the recent “Brexit” vote.
It did say it is likely to further subdue already cautious investment sentiment, causing investors to delay making decisions.
The first line of the mass rail transit project is scheduled to begin operation by end-2016.
Line 1 is 51 km in length and will serve 31 stations, and upon completion, should further benefit the suburban sub markets and Malaysian offices in general.
