KL a competitive office location in Southeast Asia, says property consultant

KUALA LUMPUR: Office rentals in Kuala Lumpur are expected to stabilise in the first half of 2010, barring any major economic setbacks, according to a special report by CB Richard Ellis Research, Asia on Malaysia’s Market Prospects.

CB Richard Ellis (CBRE) (Malaysia) Sdn Bhd’s executive chairman, Christopher Boyd, commenting on the report said: “The combination of modern infrastructure, quality facilities and comparatively cheap rentals makes Kuala Lumpur a highly attractive location for any prospective multinational considering a move.”

He added that “Kuala Lumpur offers a consistent cost advantage, as growth in the supply of new buildings serves to smooth any potential fluctuations in rental levels”.

CBRE (Malaysia), which today renamed itself from Regroup Associates Sdn Bhd, said it expected continued broad-based demand across a wide range of sectors including Islamic finance, the oil and gas industry, agribusiness and commodities.

The trend in stepped-up rate of completions of office development is set to continue for the next three years with a further 2.4 million sq ft, 2.82 million sq ft and 3.93 million sq ft by the end of 2010, 2011 and 2012 respectively.

Despite weakening rentals and slightly higher yield expectations, office capital values are expected to remain steady throughout 2010, generally ranging between RM800 and RM1,200 per sq ft (psf), it said in a statement.

The majority of investment transactions have involved local investors as foreign buyers are still hesitant. The average transaction price of office properties in KL had decreased by around 14.3% from RM950 to RM814 psf year-on-year, but the fall has not been as severe as that recorded in other markets in Southeast Asia, it added.

CBRE (Malaysia) said the market has not yet experienced the full impact of the last budget announcements which further liberalised the acquisition of property investments by foreigners.

CBRE (Malaysia)’s executive director, Paul Khong said: “With no requirements for local equity, we expect to see an increasing number of overseas institutions seeking investment-grade property in Malaysia in 2010 and beyond.”

Meanwhile, the company’s managing director, Alan Soo said “KL offers a wide choice of buildings and locations at rentals which are going to remain extremely competitive in the foreseeable future”.