KL office market to stay soft, competitive

KUALA LUMPUR: The office market is expected to remain soft and competitive due to completion of new buildings in 2011 as well as the completed refurbished office buildings, Cushman & Wakefield said in its Kuala Lumpur office marketbeat report 4Q2010.

It added that the "tenant-favoured market" is expected to prevail and thus, more incentives other than rent free and fit out allowances are expected to be offered by the landlords, especially buildings with high vacancies.

"The average occupancy rates and the rental rates are expected to come under pressure in 2012, with a large incoming supply being completed in the city centre and the fringes of KL. Nevertheless, the government initiatives such as the government's Economic Transformation Programme (ETP), the 131 entry point projects (EPPs) and the proposed infrastructure projects (ie the MRT and the extension of the LRT lines) are expected to create business and job opportunities and thus, this may cushion the impact of the large incoming supply of new office buildings," it noted.

The research house said the release of the 3Q2010 national accounts data confirmed that the recovery in Malaysia is moderating. Real gross domestic product growth eased to a weaker than expected 5.3% year-on-year, down from 8.9% in the 2Q2010 and a robust 10.1% recorded in the 1Q2010.

In light of the softer outturn, Bank Negara Malaysia has maintained the interest rates at 2.75% in order to sustain the growth with a 2% acceleration in consumer prices is expected by end of 2010.