KL office rent declines moderated in 3Q2018, says Knight Frank

PETALING JAYA (Nov 27): Average office rents in Kuala Lumpur city centre declined slightly by 0.2% quarter-on-quarter to RM5.80 psf per month in the third quarter this year (3Q2018), decelerating from the 0.8% fall seen in the preceding quarter.

The improvement came as the commodity sector starts to see some signs of life on sustained oil price growth and the growing coworking sector, according to consultancy Knight Frank in its “Asia-Pacific Prime Office Rental Index for Q3 2018” report. 

On a year-on-year basis, the average rent has dropped 2% against the corresponding period last year.

“The outlook for both Kuala Lumpur and Selangor office markets continue to remain subdued in 3Q2018. Despite this, the rise of shared offices and coworking segments provide a slight breather to the oversupplied office market,” Knight Frank Malaysia corporate services executive director Teh Young Khean said in a press release today.

Looking ahead, forward near-term expectations for rental growth should remain subdued as landlords are still offering packages to attract occupiers, read the report.

The rental growth in Greater KL is expected to remain challenging for the rest of 2018 as there is no major catalyst to boost demand in the short to medium term,” said Teh.

Overall, the Asia Pacific region recorded softer rental growth in 3Q2018 as office occupiers delayed their major real estate decisions due to the trade tensions between the US and China which has created an air of uncertainty among global business leaders despite the healthy economic conditions across the region, said the report.

In 3Q2018, Knight Frank’s Asia-Pacific Prime Office Rental Index grew 2.3% quarter-on-quarter to 141, slowing slightly from the 2.4% rise seen previously, with 18 out of the 20 cities it tracked reporting stable or increased rental growth.

The firm expects the Asia-Pacific prime office markets to continue seeing steady growth for the rest of 2018 given the positive economic trends across the region.

“While we are starting to feel the impact of the trade tensions flow through the Asia-Pacific office markets, sound economic conditions are expected to support office demand and drive steady rental growth across the region,” said Knight Frank head of research for Asia Pacific Nicholas Holt.