Market in focus - Malaysia
7 questions with Young Khean Teh, Head of Office Strategy & Solutions, Knight Frank Malaysia
4 minutes to read
This article was originally featured in our (Y)OUR SPACE Digest Summer 2024. Download the full publication here.
1. YK, can you tell us a little about the OS&S team in Malaysia and its key achievements to date?
We are grateful to have been recognized as The Best Commercial Real Estate Firm in Malaysia for four consecutive years since 2021. We have also been awarded the Best Commercial Rental Deal for two years running, in 2023 and 2024. Today, we are proud to say that we have grown to become the largest team specializing in commercial office leasing in Malaysia.
2. How would you describe the dynamic of the KL market over the last six months?
The KL market, specifically within the Klang Valley which includes Kuala Lumpur and Selangor, has shown a gradual and positive take-up over the past six months.
The addition of 3 million square feet of new office space since last year has expanded the market supply. This gives tenants more options when considering expanding or relocating offices in the Klang Valley. As a result, there has been a slight uptick in average office rental prices this year, reflecting the availability of higher-quality office spaces in the market.
Another notable trend in the market is the rising demand in Tun Razak Exchange (TRX) area, especially after the launch of The Exchange TRX Shopping Mall. The financial district has attracted companies not only from the banking & financial players but also technology and multinational corporations due to its superior connectivity, strategic location and the marquee incentives given to financial corporations.
3. What are the primary sources of demand for offices in KL?
Sectors that are actively taking-up spaces in the market including oil & gas, technology sector, shared services, professional services, information technology, banking & financial services as well as FMCG/retail.
It is also noteworthy that Malaysia, especially Klang Valley, has become an attractive location to set up offshore centres. A recent Knight Frank study estimates Malaysia contributes roughly 8% to the Asia-Pacific offshoring market, driven by competitive rental rates, a skilled talent pool, and strong government support for the digital economy. These factors are crucial for businesses seeking cost-effective and strategically located spaces to support their regional operations.
4. Why is KL – and Malaysia as a whole – seeing such interest from corporates seeking to offshore business functions?
Malaysia stands out with its multiracial community that fosters proficiency in multiple languages, including English, ranking third in Asia on the 2023 Education First (EF) English Proficiency Index (EPI). Its universities and educational institutions are recognised for high quality, cultivating a skilled talent pool adept in IT, finance, and customer service sectors.
Operational costs in Malaysia are relatively low and competitive compared to other countries, including rental, utilities, and labour costs. Despite competitive costs, Malaysia’s robust infrastructure and services are also the key attractions.
The Malaysian government proactively fosters a conducive environment for foreign businesses, offering incentives and other financial benefits to attract and retain multinational corporations.
5. What key considerations must those planning to set up an offshore centre in Malaysia keep in mind?
Location: Choose a prime office location with excellent amenities, close to transportation hubs, dining, and recreational facilities to attract and retain talent and enhance productivity.
Building Features: Ensure the building has reliable internet, modern communication systems, and advanced security. Opt for green-certified buildings to align with ESG practices and improve corporate image.
Regulatory and Legal Framework: Work with agencies like MDEC and MIDA for setup guidance, compliance with local laws, and access to incentives such as tax breaks and grants to reduce costs.
6. What deal over the last twelve months are you proud of and why? What value did it bring to the client?
Over the past twelve months, we are particularly proud of successfully assisting several technology and oil & gas companies in their initial setup in Malaysia. Being their initial touchpoint, we ensured a smooth journey, providing exceptional value and services. We have assisted approximately 700,000 sq. ft of new set-up transactions.
7. How do you see the trajectory of the KL market over the remainder of 2024, and why?
The market is projected to remain stable with incremental improvements in occupancy rates and rental prices throughout the remainder of 2024. This optimistic trajectory aligns with a positive economic outlook and strategic initiatives by the government.
The Malaysian government is actively pursuing trade and investment opportunities through strengthened diplomatic relations, emphasizing political stability. According to the Economic and Monetary Review 2023 by Bank Negara Malaysia, released in March 2024, Malaysia’s economy remains robust. The economic outlook for 2024 appears brighter than in 2023, with projected growth forecasted between 4% to 5%.
The new supply expected in the second half of 2024 consists mainly of mid-sized buildings. As a result, we do not anticipate significant disruptions to the market.