Demand for decentralised office space outpaces KL city centre

28 January 2013

KUALA LUMPUR - The growth of office buildings or space located at the fringe of Kuala Lumpur have been outpacing those in the city centre over the past few years and the trend is expected to continue with increasing demand for decentralised office locations, said Knight Frank Malaysia managing director Eric Ooi.

"There is a sustained and growing demand for decentralised office space in line with more active office and integrated developments, especially in the localities of KL Sentral, Bangsar and Pantai as well as those located along the Mass Rapid Transit (MRT) route," he said in his presentation on "Office Market Performance and Outlook" at the Sixth Malaysian Property Summit 2013.

Ooi said a growing number of companies are looking to relocate from the city to decentralised office locations, especially shared service operations that favour such locations.

"There is a growing opportunity for Malaysia as a preferred destination for shared service operations as Malaysia has competitive advantages when compared with other countries in the region like Thailand, the Philippines, Singapore and India," he said.

Ooi estimates there will be a supply of 14.2 million sq ft of office space in the city and city fringe between 2013 and 2015.

"By 2015, office space in Kuala Lumpur is expected to total some 80 million sq ft from 65.8 million sq ft currently, depicting an increase of 21.5% over three years and 53.4% of this incoming supply is expected to come from the city fringe, mainly from the locality of KL Sentral," he said.

This year, the bulk of incoming supply will come from the city fringe with a total net lettable area (NLA) of about 4.1 million sq ft from buildings such as Menara LGB, Bank Rakyat headquarters, Menara Shell, CIMB headquarters, Menara 1 Sentrum and Nu Towers (Lot G of KL Sentral).

In the city, two buildings are due for completion this year, namely Menara Hap Seng 2 and Crest Sultan Ismail with a combined NLA of about 580,000 sq ft.

The existing supply of purpose-built office space currently stands at about 65.8 million sq ft, with about 7.5 million sq ft of "Prime A+" office space. Of this, 73.4% is in the city and the remaining 26.6% is in the city fringe.

However, supply from the city fringe has been outpacing supply in the city since 2005, with average growth of 11% to 13% per year.

"Kuala Lumpur city fringe continues to record marginally higher average occupancy at 82% in comparison with the city's 80%, indicating growing demand for decentralised office space," said Ooi.

He said the achieved rental rates in the city fringe continue to hold steady at between RM4.50 per sq ft and RM7.30 per sq ft.

"The popularity of Kuala Lumpur city fringe as an alternative office location is supported by improved infrastructure which provides easy accessibility and connectivity to various parts of the Klang Valley as well as the availability of good grade office space at attractive/competitive rental rates."

-thesundaily