KUALA LUMPUR: Rental of prime office space in the Kuala Lumpur city centre, after staying stagnant from the third quarter of 2013 (Q3 2013) to Q4 2013, is not expected to see any increase for the next 12 months.
According to Knight Frank’s Asia-Pacific Prime Office Rental Index for Q4 2013 released yesterday, the Kuala Lumpur office market is likely to remain sluggish, with a high vacancy rate.
It said the gross effective rent increase for Kuala Lumpur’s prime offices is at US$19.60 (RM64.34) per sq m/month, the lowest in the Asia-Pacific region.
This compares with the highest of US$162.80 recorded in Hong Kong, followed by Singapore (US$92.80), Beijing in China (US$91), Seoul in South Korea (US$81.90), and Tokyo in Japan (US$79.50)
Knight Frank said prime office spaces in Jakarta’s central business district recorded the highest rent increase of 8.4% from Q3 2013 to Q4 2013.
“Although we expect rental growth to continue, the upcoming election and significant new supply coming to the market in 2014 are likely to slow this growth over the coming months,” it added.
The other Asia-Pacific cities that have shown rental increases for the three-month period are Tokyo (+4.2%), Hanoi in Vietnam (+ 2.9%), Seoul (+2.6%), Singapore (+2.2%), and Bangkok in Thailand (+1.7%).
“Despite unrest in Thailand’s capital city, Bangkok Grade A rents grew by 1.7% over quarter, given 39,000 sq m of net absorption and a falling vacancy rate.
“Although the uncertainty caused by ongoing events is likely to soften demand over the coming months, the lack of new supply is likely to underpin further rental growth in 2014.”
Knight Frank said Tokyo recorded the second highest quarterly growth in office rental of 4.2% due to an increase in corporate earnings, leasing activity and decreasing vacancy rates across all wards.
It said Hong Kong’s office market continued to soften by -1% quarter-on-quarter, as occupiers remained cost conscious and net absorption remained subdued. However, Grade A office leasing is set to remain stable throughout 2014.
The Australian quartet of Brisbane, Melbourne, Perth, and Sydney also has a softening office rental market in 4Q 2013.
Overall, Knight Frank said the rental index for the Asia-Pacific region inched forward by 0.8% in 4Q 2013 and is 3.1% above its pre-crisis peak in the second quarter of 2008. The region also saw vacancy rate increased to 12% as a result of significant construction completions.
This article first appeared in The Edge Financial Daily, on March 04, 2014.
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