THE Kuala Lumpur office market has never been more intense and is currently at a crossroads, with adaptability and innovation key to determining an asset’s success, according to real estate agency Zerin Properties founder and group CEO Previn Singhe.

“For instance, Merdeka 118 is setting new benchmarks, with about 1.7 million sq ft of net lettable area (NLA) and a reported pre-commitment level of around 70%.

“Similarly, Exchange 106 in Tun Razak Exchange (TRX) stands out with its world-class infrastructure and positioning in a financial hub. Both developments command the highest rents in KL’s commercial office market. While KL city centre remains a stalwart, the spotlight is increasingly shifting towards newer, greener buildings that offer enhanced sustainability and smarter office environments,” he tells The Edge.

The demand for Grade-A office space remains strong, driven by Malaysia’s stable economic growth and favourable business environment. The launch of TRX as the International Finance Centre in February 2024 will further boost demand in the area, attracting both local and international companies, with relocation incentives enhancing its appeal, Previn says.

Gross rent psf for Merdeka 118 is between RM10.50 and RM12.50, occupied mainly by Permodalan Nasional Bhd (PNB). In 2022, Malayan Banking Bhd (KL:MAYBANK) announced plans to relocate its headquarters from Menara Maybank to Merdeka 118, taking up 33 floors, or 650,000 sq ft, in the latter.

In comparison, rents at Exchange 106 are between RM10 and RM15, and the building is currently 52%-occupied and expected to reach 70% by year’s end (see tables). Among tenants for Exchange 106 are Ant International, Huawei, Accenture and Agoda.

Over in the KL city centre area, the fully occupied Menara 3 Petronas’ gross rental is between RM11 and RM12 psf; and Menara Binjai fetches RM7.80 to RM8.80 and is 70%-occupied. Over at the 33-storey Menara HLX, formerly known as Menara HLA, gross rental rates are RM4.50 to RM5.50 psf.

CBRE | WTW in its Real Estate Market Outlook 2025 said that upon the completion of Merdeka 118, Pavilion Damansara Heights Corporate Tower 1, Menara Felcra and ATWATER Corporate Towers in 2024, the total office supply in the Klang Valley reached 125.5 million sq ft. Of this supply, 72% is located in KL. Prime purpose-built offices are about 62 million sq ft in total, or 49% of overall office supply.

Challenges of older office buildings
“Merdeka 118 continues to attract high-profile tenants, benefiting from its modern, sustainable design and prestigious location. Similarly, premium buildings in KLCC with LRT/MRT connectivity also remain highly sought after but face increasing competition from newer developments offering advanced facilities, sustainability features and smart-office technologies. In contrast, older Grade-A buildings in the KLCC area are struggling to maintain demand unless they undergo significant upgrades to meet modern tenant expectations.

“The shift in tenant preferences towards newer, more flexible and ESG-compliant spaces is evident as companies prioritise sustainability and efficiency in their office environments. Location alone no longer suffices; tenants now seek buildings that deliver superior experiences and value,” Previn explains.

CBRE | WTW group managing director Tan Ka Leong says the availability of prime office space continues to attract occupants from non-prime offices, further driving down their occupancy rates. Non-prime offices with outdated layouts and services face the decision to reinvent themselves, repurpose their space or undergo redevelopment.

Knight Frank in its Real Estate Highlights 2H2024 report sees larger floor plates that are typically at least 20,000 sq ft becoming increasingly favoured, particularly in the KL fringe and Petaling Jaya areas. These locations are highly attractive because of their robust amenities and excellent connectivity, including proximity to train stations.

TRX continues to thrive as a financial hub, supported by its integrated shopping mall and seamless MRT connectivity.

Corporate relocations to newer buildings are seeing older office buildings in the KLCC area, for example, underutilised, opening opportunities for reinvention and avenues for creative repurposing. In fact, Previn says, transactions involving dated office buildings are gaining traction as developers and investors look to unlock value through redevelopment or repositioning. Redevelopment is a strategic option when older buildings face structural limitations that hinder repurposing.

Having said that, repurposing older office buildings into residential, hotel, healthcare or even mixed-use developments successfully depends on factors such as market demand, location and the unique characteristics of each property. The challenges include zoning restrictions and regulatory compliance, Previn adds, as well as structural modifications to meet specific requirements of residential, hospitality or other uses to ensure adequate natural light, ventilation and functional layouts.

Among notable successful repurposing of office buildings in the city are Menara ING, which was repurposed into Holiday Inn Express Kuala Lumpur City Centre; and Wisma KLIH, which was sold to HYM Signature Sdn Bhd in 2019 and transformed into a four-star, 133-room boutique hotel called WOLO Kuala Lumpur.

Another example is Wisma KFC on Jalan Sultan Ismail, which was acquired by Hap Seng Consolidated Bhd (KL:HAPSENG) from Singapore’s Royal Group for RM190 million three years after the latter purchased it from the Employees Provident Fund. The property was repurposed into Hyatt Centric City Centre Kuala Lumpur, which has recently opened. Both deals were concluded by Zerin Properties.