This article first appeared in City & Country, The Edge Malaysia Weekly on October 6, 2025 - October 12, 2025
The Klang Valley office market continued on a steady course in 2Q2025, supported by sustained leasing interest in prime locations and stable rental trends, says Knight Frank Malaysia executive director of research and consultancy Amy Wong in presenting the The Edge Malaysia | Knight Frank Kuala Lumpur and Selangor Office Monitor 2Q2025.
The net absorption in Kuala Lumpur totalled about 409,000 sq ft in 2Q2025, moderating from the previous quarter’s 716,000 sq ft. She says these figures are about 30% lower quarter on quarter (q-o-q) but up 45% year on year (y-o-y), indicating “a slower yet resilient pace of leasing”.
In Selangor, net absorption rose to about 159,000 sq ft in 2Q2025 from 85,000 sq ft in 1Q2025, with better demand within the Petaling Jaya locality.
As for occupancy rates, KL City saw a rise of 0.9 percentage point (ppt) from 68.7% in 1Q2025 to 69.6%, and KL Fringe saw an increase of 0.5 ppt from 89.2% in 1Q2025 to 89.7%.
In contrast, Selangor registered a 1.3 ppt dip, from 75.1% in 1Q2025 to 73.8%, due to newly completed stock, according to the monitor.
“While headline indicators remain broadly positive, occupier strategies continue to reflect a degree of caution amid rising business costs and a slower global economic backdrop. Recent policy signals including Bank Negara Malaysia’s downward revision of GDP (gross domestic product) growth and the extension of service tax to commercial leases have added to cost considerations and potentially lengthened decision-making cycles,” Wong adds.
Even so, there were some notable office tenant movements in the quarter under review. “Prime offices continue to attract strong interest from occupiers, particularly MNCs (multinational corporations) seeking to align with sustainability goals,” says Knight Frank Malaysia executive director of office strategy and solutions Teh Young Khean.
“Demand has been led by the professional services, finance, technology and energy sectors, with preference for buildings offering modern specifications and good accessibility to amenities or those located within integrated developments.”
In KL City, The Exchange 106 saw a notable new set up with about 270,000 sq ft taken up by co-working and flexi space providers. At Menara Binjai, around 36,000 sq ft was occupied by a technology/electronics company and a fintech company, marking both expansion and relocation activities. Meanwhile, Hampshire Place recorded about 8,000 sq ft of tenant movement, with a government or embassy agency relocating into the building.
In the KL Fringe, The Gardens North Tower welcomed new occupiers, comprising a financial services firm seeking to expand and a co-working/flexi space provider setting up operations, that took up about 48,000 sq ft. Menara UOA Bangsar also saw fresh activity, with around 44,000 sq ft taken up by a business process outsourcing BPO company and a financial service firm.
In Selangor, IOI City Towers registered one of the larger relocations with about 76,000 sq ft secured by players in the industrial/aerospace and financial services sectors. At 8 First Avenue, around 28,000 sq ft was taken up by a co-working and flexi space provider.
Limited incoming supply manageable
The current estimated supply of office space stands at 60.63 million sq ft in KL City, 31.7 million sq ft in the KL Fringe and 27 million sq ft in Selangor, bringing the total to 119.33 million sq ft.
Only one new building, Sunway Square Corporate Tower 2 in Bandar Sunway, Selangor, was completed during the quarter, adding 538,000 sq ft and bringing year-to-date new supply to about 1.1 million sq ft. Completions in 1Q2025 added 500,000 sq ft in Oxley Tower on Jalan Ampang and The Exchange TRX Campus Office at Tun Razak Exchange (TRX).
Looking ahead, the new supply under construction or expected to be completed between 2H2025 and 2026 amounts to an additional 4.41 million sq ft. In KL City, no completions are expected in 2H 2025, but about 0.39 million sq ft is projected for 2026, making up the sub-total for this submarket.
The KL Fringe is expected to see more significant additions, with 0.48 million sq ft completing in 2H2025 and a further 1.53 million sq ft in 2026, totalling 2.01 million sq ft. In Selangor, the upcoming supply is also substantial, with 0.81 million sq ft scheduled for 2H2025 and 1.20 million sq ft in 2026, similarly reaching 2.01 million sq ft.
“Looking ahead, around 1.3 million sq ft is expected to be completed in the second half of 2025, followed by a further 3.1 million sq ft in 2026. Together, these additions represent a projected 3.7% increase in total stock, with much of the new space concentrated in KL Fringe and Selangor,” Wong says. “Supply pressures remain manageable in the short term. This moderate pipeline gives landlords some room to navigate leasing activity while sustaining rental stability in key locations.”
Marginal change in rental rates
The Klang Valley office market’s rental rates witnessed marginal changes across various submarkets in 1Q2025.
“Rental trends were broadly stable across the region, with minimal changes q-o-q, as tenant decision-making remained value-conscious and focused on long-term workplace efficiency,” Teh says.
In KL City, rental rates for 1Q2025 averaged RM6.69 psf per month, with the new Central Business District (CBD) recording the highest at RM7.31 psf, followed by the KL City Centre peripheral at RM5.70 psf and the old CBD at RM4.45 psf.
For 2Q2025, overall rental rates are expected to edge slightly higher to RM6.70 psf per month, which is a 0.1% increase from the previous quarter. The new CBD is projected to see a modest increase to RM7.33 psf, while the KL City Centre peripheral with RM5.70 psf and old CBD with RM4.45 psf are anticipated to remain stable.
In the KL Fringe, overall rental rates held steady at RM5.81 psf per month in 2Q2025, unchanged from the previous quarter. Across most submarkets, rents remained stable. Damansara Heights and KL Sentral maintained their levels at RM4.62 and RM6.41 psf respectively. Similarly, Mid Valley City/KL Eco City stayed at RM6.47 psf, while both Bangsar South/Kerinchi with RM5.70 psf and Pantai/Bangsar with RM5.07 psf also recorded no change q-o-q.
The only submarket to register an increase was Taman Tun Dr Ismail/Mont Kiara/Dutamas, by 0.4% q-o-q, from RM5.26 to RM5.28 psf per month.
In Selangor, overall rental rates rose slightly by 0.9% q-o-q, increasing from RM4.22 psf in 1Q2025 to RM4.26 psf. The uplift was driven primarily by Subang Jaya, which recorded a notable 5.4% increase, climbing from RM4.27 psf in 1Q2025 to RM4.50 psf, attributable to the recent completion of Sunway Square Corporate Tower 2. Petaling Jaya also posted a marginal gain of 0.2%, rising from RM4.56 psf in 1Q2025 to RM4.57 psf.
In contrast, Shah Alam and Cyberjaya remained unchanged q-o-q, at RM3.46 psf and RM3.72 psf respectively.
On his outlook for the market in 2H2025, Teh says, “Looking ahead, the office market is expected to maintain a stable footing through the second half of 2025, although broader macroeconomic conditions and additional statutory costs may continue to influence leasing timelines. Over the longer term, the market is likely to adapt to these evolving dynamics.”
Office-related announcements in 2Q2025
Notable office openings this quarter included:
- Siemens Malaysia moved its headquarters to The MET Corporate Towers, a certified green building, as part of its push toward more sustainable operations. The space incorporates its own building technology hardware to support evolving business needs and sustainability goals.
- Generali Malaysia opened its new headquarters at Menara Generali, consolidating over 1,000 staff from four sites to streamline operations and reinforce Malaysia’s role in its regional strategy.
- Airbus’s new office in Putrajaya houses 170 staff to support regional airline operators and reaffirms its long-term presence in Malaysia, its third-largest market in Asia.
- Transaction Network Services’s new office at Menara Binjai signals continued investment in Asia-Pacific and stronger support for local and international clients.
- This quarter saw continued traction in the co-working and flexible office segment, driven by expansions and strategic tie-ups:
- WORQ and Sunway Property launched a new 20,000 sq ft co-working space at Sunway V2 Tower, their second joint outlet following Sunway Putra. Located within a transit-oriented and integrated development, the space is already more than 70% leased, with rates from RM500 to RM800 per person.
- Private equity firm Censuria Capital Sdn Bhd and China-based CHL Group have partnered to develop premium office spaces at The Exchange 106, marking CHL’s first overseas strategic investment. The office space targets financial institutions, MNCs, investment firms and more.
Upcoming office developments this quarter:
- TRX City Sdn Bhd has begun construction on a 39-storey office tower in the Tun Razak Exchange, slated for completion in 2029. Designed to international standards with MRT access and WELL Core & Shell certification, the building will be anchored by PwC Malaysia, which is relocating from KL Sentral and taking up over 200,000 sq ft.
- TA Global Bhd has introduced The Arden, a 38-storey Grade A strata office tower within its Damansara Avenue masterplan in Bandar Sri Damansara. Targeting a wide range of occupiers, the project will offer 455 office units sized from 495 to 3,111 sq ft and is scheduled for completion in 2Q2028. The GreenRE-certified building will be directly connected to the Sri Damansara MRT station and feature a mix of corporate and lifestyle facilities.
- Owned by PKNS Real Estate, Menara Worldwide, a 25-storey Grade A office building along Jalan Bukit Bintang, has been put up for sale with an indicative price of RM250 million. The 275,000 sq ft building is 70%-occupied, with tenants including AIG Malaysia and Cotton On’s corporate office. Asking rents range from RM6 to RM6.50 psf.
- Permodalan Nasional Bhd has placed Project 1194, a mixed-use development on Jalan Sultan Ismail, on the market. The project includes a 35-storey office tower (Menara 1194) offering 170,000 sq ft of NLA and a 50-storey luxury hotel with 481 rooms. Strata pricing is reportedly guided at RM1,300 psf.
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