PETALING JAYA (Dec 3): Kuala Lumpur’s office rents recorded a 2.1% q-o-q increase in the third quarter of 2019, according to real estate consultancy Knight Frank’s Asia-Pacific Prime Office Rental Index. 

Nevertheless, Knight Frank Malaysia expects KL office rental to decline in the future as the 2.1% rise was mainly due to the addition of two new office towers in the TRX financial district in the Malaysian capital, namely The Exchange 106 and Menara Prudential which held premium rents. On a yearly basis, the index for KL climbed 1.5% in Q32019.

“Malaysia’s tallest tower and the capital city’s latest iconic skyscraper, The Exchange 106 @ Tun Razak Exchange (TRX), was awarded the Certificate of Completion and Compliance (CCC) for the lower zone of the building in Q32019. The building, which is reported to have achieved circa 20% pre-committed occupancy, offers good quality and high specification space and hence, command higher rental rates,” Knight Frank Malaysia executive director of corporate services Teh Young Khean said in a press release today.

Despite the increase, Knight Frank believes that Kuala Lumpur’s overall office market remains under pressure, with high impending supply and landlords continuing to offer attractive lease packages to retain or attract tenants. Hence, the office rental market would likely remain challenging in the short to medium term.

Unexciting forecast for Asia-Pacific office rental
The overall Asia-Pacific Prime Office Rental Index rose 0.1% q-o-q to 157.3 in Q32019, slower than the 0.9% q-o-q growth registered in Q22019. On a yearly basis, the index climbed 1.8%, decelerating from the 3.4% rise in Q2.

“The office markets across the Asia-Pacific region continue to face familiar foes as aftershocks from the ongoing US-China trade tensions continue to impact market confidence, a concrete Brexit conclusion remains elusive and Hong Kong, a major office market within the region, grapples with unprecedented social unrest,” the consultancy noted.  

Of the 20 cities tracked by the index, 12 recorded either stable or increased quarterly rents in Q3, less than the 14 cities reported in Q2.

India’s Bengaluru outperformed with the highest rise at 8% q-o-q, driven by a healthy 33% y-o-y growth in H1 2019 in the IT industry. The city’s rents climbed by 17.6% y-o-y. 

Australia’s office markets saw a healthy Q3 thanks to the steady economy, low unemployment, low interest rates, continued demand for quality space and limited supply. Sydney’s rents rose 2.5% q-o-q due to limited available supply and continued demand for prime space, while Perth recorded a 2.3% q-o-q rental growth as the recent sustained recovery in the commodity sector continues to drive a turnaround for the office market.  

Meanwhile, Hong Kong recorded the biggest decline of 5.6% q-o-q and 8.3% y-o-y among the 20 cities, as the tenant decentralisation trend continued and the ongoing social unrest persists.

“Heading towards the end of 2019, the consultancy maintains its estimation for a softer full year result. The rental index is expected to grow between 0 to 3%, down from 7.7% recorded in 2018,” said Knight Frank. 

 

Table: Asia-Pacific Prime Office Rents Q3 2019

Markets

City

Submarket(s)

3-month % change

 

12-month % change
 

Forecast next 12 months

Australia

Brisbane

CBD

1.2

3

Increase

Melbourne

CBD

2.1

15.5

Increase

Perth

CBD

2.3

3.4

Increase

Sydney

CBD

2.5

6.4

Increase

East Asia

Tokyo*

Central 5 Wards

-4.3

1.6

No change

Beijing

Various

-0.8

-4.7

Decrease

Guangzhou

CBD

0.2

1.4

Same

Shanghai

Puxi, Pudong

-1.1

-2.1

Decrease

Hong Kong

Central

-5.6

-8.3

Decrease

Taipei

Downtown

0

2.2

Increase

Seoul

CBD, GBD, YBD

-0.4

0.5

No change

India

Bengaluru

CBD

8

17.6

Increase

Mumbai

BKC

1

2

Increase

NCR

Connaught Place

3

4.4

No change

ASEAN

Phnom Penh

City Centre

0

0.5

No change

Jakarta

CBD

0

-10.8

No change

Kuala Lumpur

City Centre

2.1

1.5

Decrease

Singapore

Raffles Place, Marina Bay

-0.6

4.5

Increase

Bangkok

CBD

-1.2

9.4

No change

Manila

Various

-0.4

7.5

Decrease

Source: Knight Frank Research / *Sanko Estate

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