Office space sector to recover in tandem with uptick in economic activities

KUALA LUMPUR – The pace of recovery in the office property sector will continue to improve in tandem with the uptick in economic activities and improved business sentiment, following the country’s ongoing transition to the endemic phase, according to Knight Frank Malaysia.

Senior executive director of research and consultancy Judy Ong said despite the growing challenges in the office market, the overall occupancy rate of purpose-built office space in Kuala Lumpur (KL) city improved to 67.2% in the first half of 2022 (H1 2022) from 66% in H2 2021.

“Similarly, the occupational demand in KL fringe was also slightly higher at 86.8% (H2 2021: 86.1%).

“However, the overall occupancy rate in Selangor declined marginally during the review period to 74.1% from 74.6% in H2 2021,” she said in a statement.

The independent global property consultancy group had released its Real Estate Highlights note on the property market’s performance across Klang Valley, Penang, Johor Baru and Kota Kinabalu in H1 2022.

According to the report, there has been renewed interest in co-working space as it presents occupiers with the agility to upscale or downscale their operations.

“The co-working model is also attractive in terms of cost effectiveness and networking, and thus, appeals to organisations of all sizes, particularly businesses that have implemented business continuity plans,” it said.

Meanwhile, group managing director Sarkunan Subramaniam said there has been overwhelming interest in Malaysian Green Technology Corporation-certified office buildings utilising green technology.

These office buildings not only support the Sustainable Development Goals 2030 agenda, but also qualifies for tax incentives.

“To further drive or retain occupancies, landlords are upgrading building specifications, prioritising health and safety and offering more flexible leasing arrangements,” he said.

Sarkunan noted that while demand for space is expected to increase with more employees gradually returning to the physical workplace, rental rates and occupancy levels of office buildings in Klang Valley are expected to remain under pressure in the short term.

“This is due to the growing mismatch in supply and demand and as more organisations, especially multinational corporations, embrace the hybrid work model,” he added. – Bernama, August 22, 2022