KUALA LUMPUR (July 26): The decentralised area (DC) submarkets of the KL office market, which is more than 8km away from the Kuala Lumpur City Centre has stable rents due to the lack of new office supply, according to JLL Property Services (Malaysia) Sdn Bhd (JLL). 

This was revealed at a press conference on Wednesday (July 26), which also included presentations on the logistics and warehousing market, and the data centre sector. 

From JLL’s office leasing advisory, Quiny Lee stated that the decentralised area covers areas such as Taman Tun Dr Ismail, Bandar Utama, Petaling Jaya old town, Subang Jaya, Shah Alam and Klang. 

The DC area achieved lower rental rates of RM4.50 to RM5 psf/month in the first half of the year. “This is because there is no new supply that is coming into the DC area."

The KL City (KLC) and KL Fringe (KLF) — which are areas more than 5km from the city centre — submarkets were more competitive in their achievable rents based on the first half of this year. The rental rates for KLC were RM6.20 to RM6.70 psf/month and KLF had rates of RM6 to RM6.50 psf/month.  

“The rental rates have slightly increased due to the completion of new building supplies for these areas,” she said. 

Lee shared that the major occupiers for each of the submarkets. For KLC the major occupiers include companies from the oil and gas, finance and banking, and flexible space operators. For KLF, they are flexible space operators, technology firms, business processing outsource (BPO) and shared services, and insurance and financial institutions. The DC area occupiers include BPO and shared services. She noted that due to the larger land size in the DC area, there is a draw of manufacturing-related companies. 

In the second quarter of this year, Lee highlighted that the DC area's office stock  and average occupancy rate remained unchanged from the previous quarter at 9.77 million sq ft and 78.6% respectively. However, there was a drop in net absorption of 2,938 sq ft from 189,350 sq ft from the previous quarter, while the average achievable rental rates fell RM4.90 psf/month from RM4.91 psf/month compared to the previous quarter.

The logistics and industrial market sector showed great promise with several hotspots such as Bandar Bukit Raja and Shah Alam, showing strong performance.

According to JLL's logistics and industrial division Derek Yap, highlighted recent transactions of industrial land in Bandar Bukit Raja which has gone up to RM145 psf this year from 2018's price of RM54 psf. 

“The increase in the land price is mainly due to the high demand of occupiers and also Bandar Bukit Raja is fast emerging as a premier industry park and is also easily accessible to several key highways. As a result, Bandar Bukit Raja is one of the highly sought after locations due to the close proximity to Port Klang and KL."

Additionally, Yap stated that the transaction for Shah Alam industrial land rates has also increased to RM300 psf from the 2018 price of between RM180 and RM200 psf.

The increase in the land prices in these two areas are expected to continue as there has been overwhelming enquiries from foreign and local manufacturers. 

In addition to land prices increasing, rental rates have also gone up, particularly in Bandar Bukit Raja and Shah Alam, Yap said, “The rental rates for Grade A logistics warehouse in Shah Alam has been about RM1.90 psf per month and now we are looking at it to be RM2.50 psf per month. Same goes for Bukit Raja, the rental rate was RM1.80 psf per month and now we are looking at it to be RM2.30 psf per month.” 

He continued to share some recent trends for Grade A industrial buildings which includes multi-storey building designs with ramp up warehouses and the inclusion of the latest fire fighting system such as Early Suppression, Fast Response (ESFR). The building specifications trends include clear ceiling height, sufficient floor loading (3 tonne/sq m), loading bays with dock leveller, Automated Storage and Retrieval Systems (ASRS) and ESG features like rainwater harvesting, solar panel, LED lighting and EV charging point. 

An update on data centres for this quarter was shared by Kent Seet of JLL’s data centre division. He stated that there are data centre entrances and expansions fuelling the supply growth pace. Upon the completion of upcoming data centre projects, Malaysia will be tripling its current live capacity from 195 megawatts (MW) to 607MW by 2025. 

“Regarding the recent announcements of data centre investments in Malaysia, the first one will be NextDC that will be opening in Petaling Jaya, Bridge Data Centres that are going to be opened in Bukit Jalil and Singtel is going to build and open its first data centre in Johor. All these will contribute to billions of ringgit of investment in our country,” said Seet. 

The sector is awaiting the Malaysian government to announce an update on the possibility of reinstating the cabotage exemption. "Cabotage is a right to operate transport services within a particular location. The Ministry of Transport of Malaysia and Ministry of Communications and Digital are reviewing the possibility of reinstating the exemption for the foreign vessels carrying out undersea cable repair work that will increase Malaysia’s competitiveness in attracting foreign investors who are looking to construct undersea cables and data centres."

Seet added that hyperscale data centres, which are often associated with large companies that require vast data processing and storage requirements, are products that Malaysia should focus on to differentiate itself from Singapore’s premium data centres. He believes this is a sector that Malaysia can excel in due to Malaysia’s larger land mass.

“Singapore will be the premium data centre hub... they will build the state of the art data centres which have greater efficiencies. Also, with limited data centres with clear policies, demand will increase and rental will increase.  

“Whereas in Malaysia we have a large land mass, our focus should be on data centre operators in the hyperscale side of the business. So buy a big piece of land, build a big data centre to cater to those tenants like Microsoft, Amazon, Google, that requires a lot of power and capacity,” he said.