“Klang Valley’s office market sees rising demand driven by MNCs and business expansions, but oversupply concerns persist as new developments enter the market. Read more on occupancy trends and future projections.“
Kuala Lumpur, 06th Mar 2025, 12.00pm – The growing presence of multinational companies (MNCs) and the expansion of existing businesses are expected to drive demand for office space in the Klang Valley, according to Henry Butcher Malaysia.
The real estate consultancy noted that Malaysia’s steady economic growth, particularly in the services sector, has supported the office market since the post-pandemic recovery. The country’s GDP is projected to expand between 4.8% and 5.3% in 2024, and 4.5% to 5.5% in 2025, with the services sector playing a key role in sustaining business activity and office space demand.
Oversupply Concerns in Kuala Lumpur and Petaling Jaya
However, the market faces an increasing supply of office space, particularly in Kuala Lumpur and Petaling Jaya, which could lead to heightened competition among landlords, affecting occupancy rates and rental prices.
Henry Butcher highlighted that newer office buildings featuring modern specifications and compliance with environmental, social, and governance (ESG) standards are more likely to attract tenants compared to older properties that have not been upgraded. Owners of older office buildings may need to reduce rental rates, invest in refurbishments, or repurpose properties for alternative uses, such as hotels, serviced apartments, or senior living accommodations.
Prime Integrated Developments in High Demand
Commercial hubs such as Tun Razak Exchange, KL Eco City, and Pavilion Damansara Heights have drawn strong interest due to their superior connectivity—often with MRT stations nearby—and access to a variety of amenities, including retail and hospitality services.
Henry Butcher also identified several proposed office developments that could further expand Kuala Lumpur’s office space supply if construction proceeds. However, some projects may face delays or remain on hold due to unfavorable market conditions or financial constraints.
Private Office Supply and Occupancy Trends
As of Q3 2024, Kuala Lumpur had 9.657 million square metres of privately owned purpose-built office (PBO) space, with 78% concentrated in the city centre. Selangor’s total supply stood at 4.352 million square metres.
An additional 0.558 million square metres of office space is expected to enter the Kuala Lumpur market, while Selangor’s new supply will be relatively lower.
In the first nine months of 2024, five new PBOs in Kuala Lumpur added approximately 270,000 square metres of office space, while Selangor saw the completion of one new building, contributing 15,728 square metres. Among these developments is Merdeka 118, a 118-storey skyscraper set to become Malaysia and Southeast Asia’s tallest office building, with key tenants including PNB and Maybank.
Looking ahead, Kuala Lumpur’s office space supply is expected to grow by another 193,000 square metres by 2027, while Selangor will see an additional 300,000 square metres by 2026.
Despite this, Kuala Lumpur’s PBO occupancy rate declined to 70.1% in Q3 2024, down from 72.2% the previous year. The city centre maintained a stronger occupancy rate of 72%, while PBOs outside the city centre saw a lower rate of 63.2%.
Selangor, however, recorded a slight improvement, with occupancy increasing from 70.2% to 71.6% over the same period.
Conclusion
While economic growth and business expansion continue to support office space demand in the Klang Valley, an oversupply of new developments may pose challenges for landlords. Moving forward, office properties that align with modern ESG standards and are strategically located with strong connectivity and amenities will likely outperform older buildings in attracting tenants.
