6 days ago
- Business
- New Straits Times
KL prime office market holds steady in Q2, rents edge up
KUALA LUMPUR: Kuala Lumpur's prime office market held steady in the second quarter (Q2) of 2025, supported by demand for premium, transit-connected and environmental, social and governance (ESG)-compliant buildings, according to Knight Frank.
In its latest Asia-Pacific Office Highlights report, it said prime office rents in the city centre averaged RM6.02 per square foot per month, up 2.6 per cent year-on-year and 0.2 per cent quarter-on-quarter, reflecting resilience in a selectively easing environment.
The real estate consultancy said the market continues to favour occupiers, with landlords focused on retaining tenants and enhancing offerings to meet evolving workspace expectations.
Senior executive director of office strategy and solutions Teh Young Khean said demand continues to gravitate towards Grade A buildings with modern specifications and within integrated developments.
"The market continues on a slow and steady trajectory, with a 1.2 per cent improvement in vacancy rates and a 0.2 per cent increase in rental compared to Q2 2025," he said in a statement.
In line with trends across Southeast Asia, leasing decisions are increasingly influenced by sustainability targets and portfolio consolidation strategies.
Kuala Lumpur stands out for offering best-in-class office specifications at significantly lower occupancy costs than regional peers.
Group managing director Keith Ooi said the city offers a compelling alternative for multinational firms re-evaluating their footprint.
"As companies seek to optimise costs without sacrificing quality or ESG alignment, the city is well-positioned to meet those needs—at a fraction of the price of markets like Singapore or Hong Kong," he added.
Vacancy levels, while currently elevated at 23.4 per cent, are showing signs of stabilisation.
This reflects both the volume of legacy stock and the widening gap between older and newer assets in terms of tenant preference.
Knight Frank said demand continues to concentrate in premium, well-connected developments.
Across the Asia Pacific region, 18 out of 24 cities tracked by the firm recorded stable or rising prime office rents in Q2 2025.
New supply added over 1.4 million square metre, but overall vacancy rates remained steady due to strong take-up in India and parts of Southeast Asia.
Knight Frank said new completions are expected to add 6.8 per cent to total office stock in Kuala Lumpur this year, sustaining a tenant-favoured environment in the near term.
However, the city's cost advantage, estimated at just US$26.70 per square foot annually, and continued infrastructure upgrades are expected to support its appeal to regional occupiers.
While rental growth may remain moderate due to supply pressures, Knight Frank said the market is seeing a clear shift toward quality-driven leasing, with well-designed, ESG-ready offices in integrated hubs continuing to outperform.
