This article first appeared in City & Country, The Edge Malaysia Weekly on June 8, 2026 - June 14, 2026

The Klang Valley office market posted a modest improvement in the first quarter (1Q2026), with both rental rates and occupancy edging higher against a backdrop of no new completions during the quarter, according to Knight Frank Malaysia senior executive director of office strategy and solutions Teh Young Khean.

“Demand was concentrated in mature ecosystem localities, particularly Tun Razak Exchange, Mid Valley/KL Eco City, Bangsar South and Bandar Sunway, where established infrastructure, connectivity, sustainability and amenity offerings continue to attract occupiers and translate directly into stronger rental rate and occupancy performance,” he says.

In presenting The Edge Malaysia | Knight Frank Kuala Lumpur and Selangor Office Monitor 1Q2026, Teh points out that the average occupancy rate in Kuala Lumpur’s new central business district (CBD) showed marginal growth, rising from 77.4% in 4Q2025 to 78.2% in 1Q2026. Meanwhile, occupancy rates in the old CBD remained unchanged at 54.1% over the same period.

In the KL city centre peripheral area, the average occupancy rate saw a slight decline from 51.6% in 4Q2025 to 51.2% in 1Q2026. Overall, the average occupancy rate across Kuala Lumpur recorded a marginal increase from 70.6% to 71%.

The KL Fringe market posted a slight improvement for average occupancy rates in 1Q2026, rising to 88.6% from 88.2% in 4Q2025.

Among the key localities, Bangsar South/Kerinchi continued to record the highest occupancy rate, inching up from 96.8% to 97.3% quarter on quarter (q-o-q), while KL Sentral remained stable at a high 95.6%, compared with 95.5% previously. Mid Valley City/KL Eco City also saw a modest increase, with occupancy improving from 88% to 88.7%.

Damansara Heights registered a slight uptick from 84.4% to 85% q-o-q while Pantai/Bangsar recorded a more notable increase, climbing from 71.8% to 73.3%. Meanwhile, Taman Tun Dr Ismail/Mont’Kiara/Dutamas was the only locality to post a decline, easing from 80.2% to 78.8% during the quarter.

Selangor also recorded a marginal improvement for average occupancy rates in 1Q2026, edging up to 73.2% from 73% in 4Q2025.

Petaling Jaya continued to post stable performance, with occupancy rising slightly to 76.6% from 76.2% in the previous quarter, while Subang Jaya registered a modest increase to 63.9% from 62.6%.

Meanwhile, Shah Alam saw occupancy ease to 86.6% q-o-q from 87.4%, although it remained the best-performing locality in Selangor. Cyberjaya also recorded a slight decline, with occupancy dipping to 69.1% from 69.9% during the quarter.

Teh says this trend in occupancy rates continues to reflect the growing differentiation between prime and secondary stock.

“While overall occupancy remains at 76.1%, reflective of broadly subdued market conditions, prime office rents have firmed by approximately 1.1%, underpinned by sustained occupier preference for modern, energy-efficient space in well-connected locations.

“This divergence is becoming increasingly structural in nature: older, non-prime assets face mounting tenant attrition and are progressively being repositioned through conversion, notably office-to-hotel and office-to-residential schemes while well-located, quality buildings continue to demonstrate occupancy resilience,” he elaborates.

Additionally, Teh says recent developments such as Merdeka 118 receiving the WELL Core Platinum certification, and WORQ Well at KL Eco City achieving full occupancy, further reflect evolving occupier priorities, particularly the growing emphasis on workplace experience, flexibility and building quality standards.

“Rather than signalling a shift in direction, these developments underscore the continued evolution of occupier expectations, particularly among multinational and regional firms,” he says.

According to Knight Frank Malaysia executive director of research and consultancy Amy Wong, rental performance strengthened modestly across the Klang Valley, with rents increasing by 0.9% q-o-q across all localities.

“Growth was supported by improving traction in the TRX precinct in the new CBD, alongside tightening availability within selected decentralised locations such as Mid Valley/KL Eco City,” she explains.

Average rental rates across KL City recorded a marginal increase in 1Q2026, rising to RM6.80 from RM6.74 psf per month in 4Q2025.

The new CBD continued to command the highest rental rates, improving from RM7.37 to RM7.45 psf per month. Meanwhile, rental rates in the old CBD edged up slightly from RM4.45 to RM4.47 psf per month. The KL city centre peripheral also registered a marginal increase, with rental rates rising from RM5.70 to RM5.72 psf per month during the quarter.

KL Fringe’s average rental rates recorded a modest increase in 1Q2026, rising to RM5.88 from RM5.83 psf per month in 4Q2025.

Mid Valley City/KL Eco City recorded the strongest growth among the key localities, with rental rates increasing from RM6.49 to RM6.64 psf per month q-o-q. KL Sentral also saw a slight uptick, rising from RM6.41 to RM6.46 psf per month, remaining among the highest priced office submarkets in the KL Fringe.

Meanwhile, rental rates in Taman Tun Dr Ismail/Mont’Kiara/Dutamas edged up marginally from RM5.28 to RM5.30 psf per month while Damansara Heights remained relatively stable at RM4.64 psf per month, compared with RM4.63 psf per month previously. Bangsar South/Kerinchi and Pantai/Bangsar maintained stable rental rates during the quarter at RM5.70 and RM5.33 psf per month respectively.

Meanwhile, the average rental rates across Selangor recorded slight improvement in 1Q2026, increasing to RM4.33 from RM4.29 psf per month in 4Q2025.

Subang Jaya continued to command the highest rental rates among the key localities, rising from RM4.63 to RM4.69 psf per month. Petaling Jaya also registered a slight increase, with rental rates improving from RM4.57 to RM4.61 psf per month.

Shah Alam recorded the strongest quarterly growth, with rental rates climbing from RM3.46 to RM3.54 psf per month. Cyberjaya remained relatively stable during the quarter, edging up marginally from RM3.72 to RM3.73 psf per month.

According to Knight Frank Malaysia’s data, in 1Q2026, the KL office market recorded net absorption of about 235,000 sq ft, up over 50% q-o-q, with stronger take-up concentrated in the new CBD, Mid Valley/KL Eco City and Pantai/Bangsar localities.

The Selangor office market recorded a more modest net absorption of some 42,000 sq ft in 1Q2026, which Wong says reflects more subdued activity outside of core office localities.

She adds that leasing activity strengthened during the quarter, driven by ongoing upgrades into quality office developments.

“This contributed to a 9.1% q-o-q increase in net absorption in the Klang Valley while occupancy improved across all localities. The KL City and KL Fringe rose 0.4% q-o-q while Selangor recorded a more measured increase of 0.2% q-o-q.”

Some notable tenant movements during the quarter continued to reflect expansion and relocation activity across both KL City and the KL Fringe, particularly from the banking and finance, technology, logistics and flexible workspace sectors.

Within KL City, Vista Tower and Equatorial Plaza recorded major expansion-related take-ups from banking and financial services tenants, involving about 43,000 sq ft and 42,000 sq ft respectively. Plaza Conlay also secured a new set-up by a co-working and flexi-space provider, occupying about 33,000 sq ft. Meanwhile, relocation-driven occupancies were observed at Integra Tower and Menara EcoWorld, involving tenants from the banking and finance as well as professional and business services sectors.

In the KL Fringe, Menara TNB Bangsar recorded the largest notable movement, with some 53,000 sq ft taken up by tenants from the pharmaceutical/life sciences and insurance sectors through relocation exercises. Plaza Zurich also saw relocation activity from a logistics-related tenant while Mercu Aspire and Menara Shell recorded expansion-driven take-ups from a co-working operator and a tech/IT tenant respectively.

Notable tenant movements in Selangor include Prima 10, which saw approximately 72,000 sq ft of space taken up by two tech and IT companies as part of relocation and new set-up activity. At IOI City Tower 2, around 9,000 sq ft was occupied by a logistics company through a downsizing move-in.

Meanwhile, Menara UAC has recorded about 18,000 sq ft of space being vacated by a banking and financial services tenant as part of a downsizing exercise. In addition, Sentral Building 2 experienced an outflow of around 99,000 sq ft, with a logistics company moving out as part of its downsizing.

In terms of the net absorption rates, Wong explains that the Klang Valley office market recorded no new completions for the second consecutive quarter, allowing more time for existing vacancies to be absorbed following the 2025 supply influx.

She adds that the Klang Valley office market is expected to see an additional 4.61 million sq ft of new office space entering the market between 2026 and 2027. Of the total upcoming supply, the KL Fringe will account for the largest share at 3.02 million sq ft, followed by Selangor with 1.2 million sq ft and KL City with 0.39 million sq ft.

Based on the current estimated office stock of 120.62 million sq ft across the Klang Valley, the incoming supply represents a relatively manageable increase of about 3.8%. KL City currently accounts for the largest office stock at 60.63 million sq ft, followed by the KL Fringe at 32.18 million sq ft and Selangor at 27.81 million sq ft.

The bulk of the upcoming supply in the KL Fringe is scheduled for completion in 2026, with an estimated 1.56 million sq ft entering the market, followed by another 1.46 million sq ft in 2027. Meanwhile, Selangor is expected to see 1.2 million sq ft completed in 2026, with no significant incoming supply currently recorded for 2027. KL City is projected to add 0.12 million sq ft in 2026 and a further 0.27 million sq ft in 2027.

Teh says because only a small portion of the upcoming supply is concentrated within KL City, this will allow for continued absorption of existing office stock in the area.

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