Kuala Lumpur has been identified as one of three office rental markets in the Asia-Pacific region that could experience a decrease in growth across the next 12 months.

The forecast is part of Knight Frank's Asia-Pacific Prime Office Rental Index for Q3 2018, which was released on November 27.

Published quarterly, the index provides occupiers, landlords and investors with a regular analysis of the rental performance of prime office properties across key markets in Asia Pacific.

While 18 of the 20 cities reported stable or increased rental growth in the last three months, Kuala Lumpur's office rental market experienced a 0.2 per cent decline.

Knight Frank Malaysia Executive Director of Corporate Services, Teh Young Khean, said the trend was likely to continue.

"The outlook for both Kuala Lumpur and Selangor office market continues to remain subdued in 3Q2018," he said.

"Despite this, the rise of shared offices and co-working segments provide a slight breather to the oversupplied office market. Meanwhile, the rental growth in greater Kuala Lumpur is expected to remain challenging for the rest of 2018, as there is no major catalyst to boost demand in the short to medium term.”

Overall, the index increased by 2.3 per cent quarter-on-quarter and 6.4 per cent year-on-year in the third quarter of 2018. 

Asia-Pacific Head of Research Nicholas Holt said office occupiers in the region had been delaying significant real estate decisions in the wake of rising trade tensions between the US and China, causing rental growth to slow.

"While we are starting to feel the impact of the trade tensions flow through the Asia-Pacific office markets, sound economic conditions are expected to support office demand and drive steady rental growth across the region," he said.

Tokyo recorded the highest quarterly increase of 5.6 per cent, due to the city's strong occupier demand and limited supply.

Source: Knight Frank

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