Malaysia could see an oversupply situation in Kuala Lumpur when projects such as Tun Razak Exchange, Menara 118 and Bandar Malaysia are completed, according to JLL Property Services (M) Sdn Bhd’s managing director Y.Y Lau.
She said that the likelihood of demand catching up with incoming supply will depend on how Malaysians drive the market over the next few years.
Lau added that the market was not expected to be active given the concerns over oil and gas prices, while Malaysians were thinking twice before making any investments for fear of incurring additional expenses.
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 depend on the quality of the buildings.
In comparison, Lau said office rental in KL was the second cheapest after Chenai, India, in the Asia Pacific region.
KL fringe areas play host to developments such as KL Eco City, Southpoint, the Vertical Corporate Tower in Bangsar South, Aurora Tower and KLCC Lot.
“Large developments in KL fringe areas could affect vacancy rates but its performance is better than CBD due to good location and access to public transportation,” she added.
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,” she said. – Bernama