Office rentals in Kuala Lumpur expected to decrease in the coming 12 months

Office rentals in Kuala Lumpur expected to decrease in the coming 12 months


Guangzhou, Shenzhen, Hong Kong, Phnom Penh, and Ho Chi Minh City could also see a decrease, while Taipei, Bangkok, Singapore, and more could see an increase.

Kuala Lumpur, Malaysia stands among a list of cities in Asia Pacific (APAC) that are expected to see office rentals decrease over the coming 12 months, according to new research.

The other cities identified on this list, published in the Knight Frank's Asia-Pacific Prime Office Rental Index for Q2 2023, are: Guangzhou, China; Shenzhen, China; Hong Kong SAR; Phnom Penh, Cambodia, and Ho Chi Minh City, Vietnam.

Meanwhile, the index also revealed the cities that will either see no changes in rentals, or increases in these 12 months:


  • Auckland, New Zealand
  • Melbourne, Australia
  • Tokyo, Japan
  • Beijing, China
  • Seoul, South Korea
  • Jakarta, Indonesia
  • Manila, the Philippines
  • Bengaluru, India
  • Mumbai, India
  • Delhi, India


  • Brisbane, Australia
  • Perth, Australia
  • Sydney, Australia
  • Shanghai, China
  • Taipei, Taiwan
  • Bangkok, Thailand
  • Singapore

A total of 23 markets in APAC were tracked on the index. Out of these markets, 15 reported stable-to-increasing rents, down from 16 in Q1 2023. Overall, the index saw a 1.6% drop quarter-on-quarter, maintaining a year-long downward trend since Q2 2022; and bringing the annual decline of rents to 3.1%. According to the research, this can be "largely be attributed to continued soft conditions in the Chinese Mainland."

As further revealed, office vacancies in the quarter rose marginally to 13.8%, reaching its highest level in over 10 years. That said, it was noted, taking into account more than 4mn sqft of office space was delivered in the last quarter, the demand for office space in APAC "has demonstrated resilience compared to the US and Europe", seeing a "stronger return-to-office trend". 

Regional highlights

Looking at Southeast Asia in specific, rental growth in the region's emerging markets have been showing signs of moderation, owing to an increased supply pipeline of offices. However, rents in Ho Chi Minh City remained on an upward trend, as new supply in 2023, while substantial, was noted to be the first in more than two years.

Over in Kuala Lumpur, the market also firmed up with rents remaining stable during the quarter, supported by Malaysia's GDP growth in Q1 2023, which "beat expectations" as the country continued to recover from the pandemic. 

Meanwhile, Singapore's market continued to remain "robust" on corporate relocations and a "flight-to-quality" trend.

Across seas, in East Asia, office markets in mainland China remained under pressure as rental declines showed little signs of bottoming, with vacancies staying "stubbornly elevated." Prime rents in Hong Kong Island also softened, pressured by vacancies that clocked another high during the quarter.

"The faltering economic recovery in the Chinese Mainland is amplifying the effects of an elevated supply pipeline across these markets, which in the past, would have little problems absorbing. A pickup in the economic recovery remains crucial to reviving the office markets in these cities," the index highlighted.

While this was so, other markets in East Asia showed contrasting figures: Leasing activity in Tokyo is rebounding on post-pandemic demand, as rents rose a marginal 0.8% for H1 2023 despite looming supply; and Seoul’s ultra-tight vacancies stood at over 1%, standing in stark contrast to most markets in APAC, and continuing to foster higher rents.

Moving on to South Asia – within this region, India has emerged as the fastest-growing large economy in the world. This undercurrent of economic stability and growth is also reflected in the relatively stable occupier activity seen in the Indian office market, as the country established itself firmly among the top outsourcing destinations with growth capital increasingly finding its way into the country.

The shrinkage in leasing by the IT sector was compensated by the flex occupiers and global capability centres, it was added. Notwithstanding the global economic headwinds, office space demand has remained extremely resilient while new supply, at a cyclical low, "preserved an equilibrium" that has helped keep rental levels stable across India's major markets in Q2, a trend that has run into its fifth consecutive quarter.

These conditions are expected to remain sustained for the rest of 2023, which will keep landlord-tenant conditions neutral, the research noted.

Finally, in Oceania, despite elevated vacancies, rents across the region rose or remained unchanged, supported by a high demand for prime spaces. Incentives remained above pre-pandemic levels but across the continent’s major markets, corporate tenants, who are focusing on the quality of their office footprint, are widening the rental gap between higher rated assets and lower quality ones.

Melbourne was the only market to experience a sequential quarterly fall in gross effective rents. With a lower exposure to technology, media, and telecom and financial services tenants, Australia’s resource driven markets – Brisbane and Perth – have seen a resurgence since the end of the last commodity boom. In particular, Perth recorded the highest year-on-year rental growth in APAC, as it benefitted from elevated bulk commodity prices and the strongest employment growth over the past three years.

Overall, with new supply easing, vacancy levels in the Pacific markets are expected to tighten gradually in the second H2 2023.

Photo: Shutterstock

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