PETALING JAYA: Office rental in Kuala Lumpur's central business district (CBD) and Golden Triangle is expected to soften by about 10% by the end of the year, according to Knight Frank Malaysia executive director Sarkunan Subramaniam.

Rents are expected to fall in the later part of the year due to weaker demand for occupancy and new office supply, says Sarkunan when presenting The Edge/Knight Frank Malaysia Klang Valley Office Monitor for 4Q2008.

The Office Monitor is based on a sampling of Secondary, Prime A and Prime A + office buildings in the Golden Triangle; the CBD including Jalan Dang Wangi, Jalan Ampang, Jalan Tun Perak, Jalan Pelaling, Jalan Kinabalu, Jalan Raja Laut and its fringes; and Damansara Heights.

The 4Q2008 Office Monitor showed office rent levelling off during the period. This was despite the tight supply of office space in these areas.

"The global financial crisis has eroded the confidence of the corporate sector causing them to cut cost and be more cautious in their expansion plans. This is causing weaker demand for office space," says Sarkunan.

Although the general average occupancy rates for offices in the CBD, Golden Triangle and in Damansara Heights was a strong 95% in 4Q2008, Sarkunan says this is probably due to decisions on new office space take-up prior to September 2008. 

He expects occupancy to dip by less than 5% by end-2009 when new office supply comes on to the market. Supply of office space within the Golden Triangle and CBD areas now amounts to about 41.1 million sq ft. 

Read the full report on the Office Monitor in the March 16 issue of City & Country, the property pullout of The Edge Malaysia.