By NST Property/Kathy B. - August 7, 2023
KUALA LUMPUR: Office space is still in strong demand on the outskirts of Kuala Lumpur, with stable rental prices and occupancy rates.
According to Keith Ooi, group managing director of Knight Frank Malaysia, the excellent infrastructure, well-known location, and dearth of Grade A offices are some of the elements that add to KL fringe's attraction.
He said that some MNC (multinational company) tenants are prepared to make a minor additional payment in order to benefit from this location's advantages.
Ooi said that Grade A offices in Selangor are witnessing robust take-up and consistent rental levels, especially in regions with good transport connections and a variety of amenities.
According to him, it is still desirable to meet market demand with high-quality, decentralised office space that offers tempting leasing bargains.
"Commercial office developers continue to innovate in tandem with evolving workplace environments. Developers are now incorporating amenities such as gyms, common lounges, event spaces, and integrated landscape areas within their office buildings.
"These additions aim to elevate the physical office experience, boosting productivity and creativity among its occupants," he said.
Examples of office developments with such amenities include The MET Corporate Towers and the Sunway Velocity V2 office tower.
The MET is the first Grade-A stratified corporate office tower in Kuala Lumpur's KL Metropolis.
The project launched in 2017 with a RM750 million gross development value. It is made up of a 42-storey tower with 356 office spaces and a 30-storey tower with 132 offices.
The buildings are GBI-certified and have been recognised by JLL as the best-value strata-titled office in Kuala Lumpur.
Christopher Lim, chief executive officer of Triterra Metropolis Sdn Bhd, told NST Property more than a month ago that 90 per cent of the two towers have been sold to multiple investors and owner-occupiers.
Lim said that nearly half of the space sold, or about 300,000 square feet of net lettable area (NLA), has been leased to various government agencies, MNCs, public-listed companies (PLC), professional service providers, and small and medium-sized enterprises (SME).
He said that there are inquiries from MNCs, SMEs, and boutique advisory firms for the remaining 50 per cent, or an additional 300,000 sq ft of NLA.
Lim expects the majority of the available NLA to be taken up in the third and fourth quarters of this year.
"The MET is GBI-rated, which I believe is the flavour of the day," he said.
Considerable demand for offices in KL City, KL fringe submarkets
According to JLL Property Services (M) Sdn Bhd's Greater Kuala Lumpur Property Market Monitor 2Q2023, there will still be a considerable demand for offices in the KL City and KL fringe submarkets.
JLL said that companies are now looking for spaces that allow for more flexibility in space planning as a result of the adoption of a hybrid workplace.
Net absorption for the first half of 2023 has already reached 80 per cent of the total volume for 2022. This means that market demand will likely perform better in 2023, it said.
JLL said that there are two main causes for this positive net absorption.
The first is that there is a trend among tenants in the financial sector, IT, and MNCs, to move more frequently to ecologically, socially, and governmentally (ESG) compliant locations.
Second, there is a trend away from price-driven decisions as tenants in the media, manufacturing, service, and technology sectors choose to rent modern offices at reasonable prices, it said.
Due to the lack of new inventory and the steady demand for the area, the KL fringe submarkets continue to have the lowest vacancy rate at 10 per cent.
In contrast, the KL City submarket has the highest vacancy rate at 31.5 per cent because of the rapid expansion of new stock.
According to JLL, the strong demand in the TRX precinct, which is slated to become a financial centre, is primarily the reason for the modest decline in 2Q2023.
Rental rates remain subdued in KL
In Kuala Lumpur, average rental rates remain subdued at RM6.40 per sq ft (psf) per month in the first half of 2023 (1H2023) vs. RM6.41 psf per month in 2H2022, according to Knight Frank Malaysia's Real Estate Highlights 1st Half of 2023 report that was released earlier this week.
The firm said that the excess supply of office space heightens market competition, leading to many landlords deploying retention strategies to maintain their occupancies.
"This presents opportunities for occupiers to secure attractive rental benefits," it said.
In KL's fringe, however, the average office rent recorded an improvement, driven by high-quality decentralised offices, particularly in areas with ease of accessibility and adequate transportation links. It was recorded at RM5.67 psf per month (2H2022: RM5.63 psf per month).
Similarly, Selangor witnessed an increase in the average rental rate to RM4.14 psf per month, supported by sustained demand for premium-quality decentralised offices in localities with good connectivity and surrounding amenities (2H2022: RM4.10 psf per month).
During the review period, asking rentals of Prime A+ and Grade A office space in KL City range from RM5.00 psf to RM12.00 psf per month depending on location (New CBD: from RM6.00 psf to RM12.00 psf per month; Old CBD: from RM5.00 psf to RM7.00 psf per month), while in KL Fringe, it ranges from RM6.20 psf to RM9.00 psf per month.
In Selangor, similar-grade office space commands competitive monthly rentals ranging from RM5.00 per square foot to RM7.50 per square foot.
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