Klang Valley office rental growth is expected to be under pressure owing to the new supply of 10 million sqft of space coming on stream over the next two years, according to Knight Frank Malaysia Sdn Bhd managing director Sarkunan Subramaniam.

“Existing landlords of office buildings may have to put more effort to undertake asset enhancement via renovation, conversion or redevelopment to optimise returns from their properties,” he said at the 9th Malaysian Property Summit (9MPS 2016) yesterday.

The event was organised by the Association of Valuers, Property Managers, Estate Agents and Property Consultants in the private sector (PEPS). The Edge Malaysia and theedgeproperty.com were media partners of the event.

Overall, the Kuala Lumpur office market was expected to remain subdued this year and the tenant favoured market would continue into 2016 and beyond, said Sarkunan.

He noted that there are a few successfully refurbished office buildings such as Menara Citibank, Kenanga International and Etiqa Twins.

In some cases, old office buildings had been converted into hotels, such as Wolo Bukit Bintang (formerly Wisma KLIH) and Piccolo Hotel (formerly Wisma Peladang), while the upcoming Oasis Hotel Suites Kuala Lumpur (formerly Plaza Atrium) was converted into serviced apartments.

“As new supply comes into the market, existing landlords will need to listen to their tenants’ needs, and offer better facilities and maintenance services to maintain or improve occupancy levels,” he said.

According to Knight Frank’s report, there is currently 92.5 million sqft of office space in the Klang Valley. However, 65% of the supply is Grade B and C offices, which have lower occupancy rates and rental growth.

Sarkunan noted that the occupancy rates of the most sought-after Grade A and A+ office space in city area could reach about 80% to 95%.

In 2015, KL city area rental rates averaged RM6.17psf; KL fringe area averaged RM5.70; and beyond KL area, the average rental was about RM4.19 psf. – thedgeproperty.com, January 21, 2016.