Malaysia’s office market is witnessing increased demand compared to the previous quarter, as leasing activity has switched from moderate to busy, and tenants are becoming less cost-conscious about relocation or expansion.
Shopping traffic in major malls continues strong, with increasing visitation from foreign tourists, but additional projects in the coveted high-rise residential sector have been postponed.
According to JLL, a Fortune 500 is a real estate and investment management organisation where no new office buildings were constructed in the third quarter (Q3) of 2023.
By the end of the year, three more high-end buildings are to finished. These buildings total up to 497,000 square feet of net lettable area (NLA).
Permodalan Nasional Bhd is redeveloping the old Malaysia Airlines Bhd headquarters. They are also revamping two office towers at Pavilion Damansara Heights.
“The market is seeing an increase in leasing activity, higher occupancy rates, and investor confidence.” “This positive momentum suggests a promising outlook for the office sector in shortly,” JLL said today at a press conference.
The vacancy rate for the office market declined to 21.3% in Q3 from 23.6% in Q2 of 2023.
Tenants took the opportunity to move to newer, more modern buildings which then resulted n higher rental prices.
JLL said that retail mall traffic has recovered to pre-pandemic levels, despite a lack of new openings.
“In Q3, there were no new retail mall openings.” However, the Pavilion Damansara Heights mall opened on October 9 and would be reflected in Q4.”By the end of 2023, the market will have gained 2.7 million square feet of retail space. The Pavilion Damansara Heights mall, The Exchange mall in Tun Razak Exchange, and Bloomsvale Mall are among them.”
Given the economic uncertainties, mall owners are wary about pressing for new retail mall openings, according to JLL.
Meanwhile, the prime high-rise residential market fell by six basis points (bps) in Q3 compared to Q2 2023 owing to ringgit weakness and increased interest rates.
According to the Valuation and Property Services Department, the number and value of residential property transactions in Greater Kuala Lumpur fell by 1.0% and 1.8%, respectively.
“Most developers face issues with paperwork which hinders the delivery of projects within the stipulated time frame,” the firm claimed.
Only two of the six projects slated for completion in Q3 were completed.
Greater Kuala Lumpur continues to dominate the logistics sector. It accounts for 68% of Malaysia’s total 36 million sq ft of prime logistics space.
Greater Kuala Lumpur is divided into three major areas. The first is Port Klang which is the primary seaport. Next, Johor is second and lastly Penang.
Johor is regarded as a mature market since it has 30% of the total quality stock. However, Penang is still an emerging market with current market share of only 2%.
The demand for warehouse space is expected to remain high as a result of manufacturers increasing their logistics operations.
Nonetheless, supply in the logistics industry is insufficient to match demand. Therefore, the average rents have risen in all three regions.
In the next 18 months, about 11 million square feet of warehouse space is projected to be finished.
