This article first appeared in City & Country, The Edge Malaysia Weekly on August 4, 2025 - August 10, 2025

Klang Valley office demand remained healthy in 1Q2025, with an uptick being driven largely by stronger absorption in newer Grade-A office buildings, according to Knight Frank Malaysia executive director of research and consultancy Amy Wong. “[This upward trend of net absorption] underscores continued demand for quality workspace,” she says.

The Edge Malaysia | Knight Frank Kuala Lumpur and Selangor office monitor 1Q2025 states that the quarter-on-quarter (q-o-q) increase in occupancy rates was 0.8% for KL City to 68.7%, from 67.9%; 1.6% for KL Fringe to 89.2%, from 87.6%; and 0.5% for Selangor to 75.1%, from 74.6%.

Wong says the KL office market recorded a net absorption of about 716,000 sq ft in the quarter, underpinned by continued take-up in newer Grade-A buildings, particularly in integrated developments. By comparison, the KL City office market recorded a net absorption of roughly 1.4 million sq ft for all of 2024.

The Selangor office market, on the other hand, recorded a more modest net absorption of about 85,000 sq ft in 1Q2025, which “reflects a more subdued activity outside of core office localities”, says Wong. In all of 2024, the Selangor office market recorded a net absorption of almost 300,000 sq ft.

Notable office tenant movements in the quarter under review in KL City include Menara Dion, which saw about 150,000 sq ft taken up as part of a relocation by the financial services industry. The Exchange 106 recorded about 63,000 sq ft in a new set-up, also in the financial services sector. Sunway Velocity 2 had around 40,000 sq ft absorbed through a mix of new set-ups and relocations, catering to both the financial services industry and a co-working and flexible space provider. Menara Binjai, on the other hand, saw the expansion of about 31,000 sq ft, primarily by the health and personal care industry and the IT sector.

In KL Fringe, Mercu Aspire accounted for the largest uptake at roughly 225,000 sq ft, through new set-ups and relocations, driven by the oil and gas industry, healthcare sector, consumer electronics and technology companies, professional services as well as pharmaceutical companies. Menara UOA Bangsar saw about 53,000 sq ft occupied by an advertising and marketing company; and The MET Corporate Towers recorded about 48,000 sq ft taken up by an industrial and engineering services provider.

In Selangor, Puchong Financial Corporate Centre 4 recorded around 30,000 sq ft in relocations by a government agency. Puchong Financial Corporate Centre 5 had about 25,000 sq ft occupied by a government agency and the IT industry. Meanwhile, Atwater Corporate Towers recorded about 16,000 sq ft of relocated space by a real estate industry player.

The current estimated supply of office space stands at 60.63 million sq ft in KL City, 31.7 million sq ft in KL Fringe and 26.46 million sq ft in Selangor, bringing the total to 118.79 million sq ft.

The new completions of office space in KL City include Oxley Tower on Jalan Ampang, which offers an estimated net lettable area (NLA) of 346,000 sq ft. Notably, Alliance Bank Malaysia Bhd (KL:ABMB) is relocating its headquarters to Oxley Tower, having acquired 24 floors of office suites and retail lots in the development in 2023. In addition, The Exchange TRX Campus Office at Tun Razak Exchange (TRX) has been completed, providing an estimated NLA of 192,000 sq ft.

According to Knight Frank Malaysia executive director of office strategy and solutions Teh Young Khean, both new completions this quarter added about 500,000 sq ft to the Klang Valley’s office stock.

“Despite the influx, occupancy and rental rates continued their upward trajectory, with rents rising at a more modest pace. Demand remained strongest for Grade-A developments in integrated environments, reflecting the sustained flight-to-quality trend,” he says.

Meanwhile, a total of 4.01 million sq ft is currently under construction: 0.39 million sq ft in KL City, 1.07 million sq ft in KL Fringe, and 2.55 million sq ft in Selangor.

“KL City and KL Fringe are expected to see a combined 1.5 million sq ft in new completions over the next two years, a pipeline that appears manageable in the light of recent absorption trends and sustained occupier interest in prime, well-connected locations,” says Teh.

“Meanwhile, Selangor is set to receive more than two million sq ft projected through 2026, including developments such as Sunway Square Corporate Towers in Bandar Sunway and The Capitol in Bandar Utama. The introduction of newer, high-spec office spaces is expected to enhance market competitiveness, particularly among cost-conscious occupiers. Given the current high occupancy rates of Grade-A offices in the Selangor market, these upcoming developments could generate renewed interest and leasing activity in the locality.”

The Klang Valley office market saw rental rates rise at a moderate pace across various submarkets in 1Q2025. Wong says: “[This] reflects gradual market improvement as occupiers remain selective in their space requirements.”

In KL City, rental rates for the New CBD averaged RM7.31 psf per month in 1Q2025, up 0.7% q-o-q from RM7.26 psf. Rates in the Old CBD remained unchanged at RM4.45 psf, and KL City Centre Peripheral also held steady at RM5.70 psf. Overall, the average rental rate in KL City was RM6.69 psf per month in 1Q2025, up 0.6% q-o-q from RM6.65 psf.

In KL Fringe, rental rates in Damansara Heights rose 0.2% q-o-q to RM4.62 psf per month in 1Q2025, from RM4.61. KL Sentral remained unchanged at RM6.41 psf, whereas Taman Tun Dr Ismail/Mont’Kiara/Dutamas increased 0.6% q-o-q to RM5.26 psf, from RM5.23 previously.

Rental rates in Mid Valley City/KL Eco City climbed 0.5% to RM6.47 psf, and Bangsar South/Kerinchi recorded the highest q-o-q increase of 1.2%, reaching RM5.70 psf, from RM5.63. Meanwhile, Pantai/Bangsar saw a marginal increase of 0.2% q-o-q to RM5.07 psf. Overall, the KL Fringe average rental rate edged up 0.3% to RM5.81 psf per month, from RM5.79.

In Selangor, rental rates in Petaling Jaya rose 0.2% q-o-q to RM4.56 psf per month in 1Q2025, from RM4.55 psf. Rates in Subang Jaya remained unchanged at RM4.27 psf, and Shah Alam and Cyberjaya also held steady at RM3.46 psf and RM3.72 psf respectively. Overall, the average rental rate in Selangor rose 0.2% q-o-q to RM4.22 psf per month, from RM4.21 psf.

“Consistent gains in both rental and occupancy rates over consecutive quarters reflect sustained office demand, particularly from the oil and gas, technology and finance sectors. Upcoming office developments with prime-grade specifications are expected to attract strong demand, especially in Selangor, where there has been limited Grade-A supply in the market,” Teh says.

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