Overview - Outlook 2012 & Hot Picks
The Kuala Lumpur commercial office market remained resilient throughout year 2011. In terms of office space leasing, the market was largely active with rents being flat. Prime office buildings in Kuala Lumpur especially buildings with MSC status and green certification continued to receive leasing enquiries from corporate entities particularly from the oil and gas industry as well as the IT sector. The current office vacancy rate stood at 13%, which is considered healthy.
This year, the Kuala Lumpur commercial office market is expected to be less vigorous as a result of uncertainties in the global economy and substantial supply of office space that are in the pipeline. The Eurozone crisis and the anticipation of huge incoming supply of office space are expected to deter any significant increase in office rents. The future office supply in Kuala Lumpur City Centre that are expected to enter the market between end 2011 and end 2012 include Menara 3 Petronas, The Crest, Menara Darusalam, Menara Prestij, Menara Felda, Menara Binjai, and Integra Tower with a total net lettable area of 3,516,443 sq ft.
Zerin Properties perceives that the office market will continue to see flat rents until the first half of 2012, with occupancies increasing at stable levels of mid-70%. However, the market is expected to bounce back during the second half coupled with the many initiatives that are being and will be implemented by the government. Initiatives under the Economic Transformation Programme such as attracting 100 multinational companies (MNCs), the Klang Valley MRT project and establishing Malaysia as a world-class data centre hub as well as favourable policies in budget 2012 such as proposed 100% income tax exemption for a period of 10 years and stamp duty exemption on loan and service agreements for KLIFD-status companies will substantially perk up activities in the office market and thus will mitigate the effect of oversupply of office space by improving the market’s net absorption rate.
The year 2011 saw the completion of several office buildings located in KL City Centre. The completed buildings are Menara Bank Islam (NLA: 355,000 sq ft) at Jalan Perak, Hampshire Place (NLA: 260,000 sq ft) on Persiaran Hampshire, Menara Worldwide (NLA: 275,000 sq ft) along Jalan Bukit Bintang, Dijaya Plaza (NLA: 150,000 sq ft) on Jalan Tun Razak and Menara Prestij (NLA: 515,000 sq ft) along Jalan Pinang.
In terms of transactions, Kuala Lumpur office transactions in 2011 include the sale of One Mont’ Kiara (done by Zerin Properties), Menara Multi Purpose, Wisma Goldhill, Putra Place, The Horizon (Phase 1 – Bangsar South) and the 33-storey corporate office tower in Dua Sentral for a total of RM1.4416 Billion.
Overall, the average rents for existing Grade A buildings in Kuala Lumpur City Centre ranges from RM6.00 to RM7.50 psf. Only a few selected buildings namely, Petronas’ Tower 2, Menara Maxis and the soon to be completed Petronas Tower 3 command an asking rental of RM10psf and above. The CBD area registered average rentals between RM5.00 and RM6.00psf for newer buildings such as CapSquare Tower whereas the older buildings revolved around RM3.00 to RM5.00psf.
The Bangsar/Pantai/Mid Valley area has a large disparity in terms of rental rates as there are various options of office towers that differ greatly. For instance, BRDB Tower has an average rental of RM6.00psf, UOA Bangsar Tower A averages RM4.00psf while Tower B has an average rental of RM5.50psf and Bangunan Syed Kechik averages RM3.50psf. Meanwhile, UOA Pantai records an average rental of RM5.00psf and The Gardens Mid Valley averages RM7.00psf.
KL Sentral continued to sustain its rental for the region whereby the average rental for both Plaza Sentral and Menara SSM was at RM7.00psf. Petaling Jaya, on the other hand, recorded an average rental of RM3.50psf for the existing buildings and RM4.50psf for its new building, Quill 9 at Jalan Semangat.
The average rental for decentralised areas such as Damansara Heights ranged from RM4.30 to RM4.50 while average rental for Grade A buildings in Mutiara Damansara and Damansara Perdana revolves around RM4.30 to RM5.50.
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