KUALA LUMPUR, (Bernama) -- Office rental in the Kuala Lumpur Central Business District (CBD) is expected to stabilise this year but concerns are emerging over a possible office space glut in 2019.
JLL Property Services (M) Sdn Bhd Country Head Malaysia Y.Y Lau said office rentals were projected to increase on the back of economic headwinds and oversupply concerns in 2019.
The KL CBD area covers developments such as KLCC, Golden Triangle and older commercial areas of the Kuala Lumpur City Centre.
"This year, we don't expect rentals to increase much in the CBD area but come 2017 and 2018, we expect rentals to increase marginally, as the oversupply situation would be somewhat absorbed.
"Generally, if you look at the supply situation, when the Tun Razak Exchange, Menara 118 and Bandar Malaysia are completed, there will be an oversupply situation because all these are huge integrated projects which will not be completed at one go by 2019," she told a press conference on the Kuala Lumpur Property Market Outlook here today.
Whether demand can catch up, Lau said this would depend on how Malaysians drive the market over the next few years.
She said the market was not expected to be active given the concerns over oil and gas prices while Malaysians were thinking twice before making any investment for fear of incurring additional expenditure.
Commenting on the fringe areas of Kuala Lumpur, Lau said office rental was expected to increase come 2017 and 2018.
"Historically, office rentals in fringe areas increased by 65 per cent from the lowest point, compared to CBD areas which went up by 20.5 per cent," she said, adding that prices depended on the quality of the buildings.
In comparison, Lau said office rental in Kuala Lumpur was the second cheapest after Chenai, India, in the Asia Pacific region.
KL fringe areas cover developments such as KL Eco City, Southpoint, the Vertical Corporate Tower in Bangsar South, Aurora Tower and KLCC Lot.
"Large developments in KL fringe could affect vacancy rates but its performance is better than CBD due to good location and access to public transportation," she added.
Meanwhile, Capital Markets Associate Director Nick Charlton said large scale infrastructure-led developments like Bandar Malaysia and in the Sungai Besi area are set to benefit from increased connectivity.