Outlook 2023 Malaysia

MALAYSIA

KEY MESSAGES BRISBANE KUALA LUMPUR

SUPPLY

DEMAND

RENTS

KEY OUTLOOK

 There is approximately 2,644,400 sq ft of new supply across three projects expected to complete in 2023. In total they are 40% pre-committed.

 After rebounding from COVID lows in 2021, net absorption is expected to reach 837,843 sq ft in 2022 and 1,956,256 sq ft in 2023.  As a result of large amounts of new supply, vacancy is expected to increase to 31% by the end of 2023 and then largely track sideways.

 Rents are forecast to decline by 1% in 2022 and then a further 0.5% in 2023 before returning to positive territory in 2024 at 0.75%.  This movement will take rents to MYR80 sqft/yr at the end of 2022.

 The completion of new, high quality stock enhances Kuala Lumpur’s Financial District – comprising of the city’s newest buildings together with high levels of amenity and integrated transport infrastructure – as a compelling destination for occupiers.

 After 2023, new supply is forecast to decline to an average of a little under 500,000 sq ft per year.

KUALA LUMPUR NEW SUPPLY

NEW SUPPLY (MSF)

7

 Following a large amount of new supply in 2021, approximately 1.2 msf is expected to enter the Greater KL market by end-2022.  3 projects, Sunway V2 Tower (362,400 sq ft), Pavilion Damansara Corporate Tower 10 (582,000 sq ft) and Merdeka 118 (1,700,000 sq ft), are currently under construction and expected to complete by 2023. They have a combined pre-commitment level of 40%.  Beyond 2024, supply is more uncertain with several shovel-ready projects yet to begin construction.

FORECAST

6

5

4

3

2

1

0

2020

2021

2022F

2023F

2024F

2025F

2026F

Source: Cushman & Wakefield

KUALA LUMPUR DEMAND & VACANCY

NET ABSORPTION (MSF) AND VACANCY RATE (%)

FORECAST

35.0%

2.5

 Tenant demand is somewhat muted due to changes in corporate workplace strategy. This is expected to continue into 2023.  Net absorption is forecast to reach 2 msf in 2023, with green-certified buildings likely to receive preference.  Vacancy is expected moderately

30.0%

2.0

25.0%

1.5

20.0%

increase to 31% as supply is expected to exceed demand.

15.0%

1.0

10.0%

0.5

5.0%

0.0%

0.0

2020

2021

2022F

2023F

2024F

2025F

2026F

Net Absorption

Vacancy Rate

Source: Cushman & Wakefield

KUALA LUMPUR RENT GROWTH

RENT (MYR/SQFT/YR) AND RENT GROWTH (% PER ANNUM)

FORECAST

-1.2% -1.0% -0.8% -0.6% -0.4% -0.2% 0.0% 0.2% 0.4% 0.6% 0.8% 1.0%

6.80

 As supply is expected to exceed demand in 2023, rentals are forecast to decline by around 0.5%, following a 1% decline in 2022.  Rent growth is expected to return to positive territory in 2024 at 0.75%.​

6.75

6.70

6.65

6.60

6.55

2020

2021

2022F 2023F 2024F 2025F 2026F MYR/SQFT/MO Rent growth (%)

Source: Cushman & Wakefield

CONTACTS

OCCUPER SERVICES: Tiffany Goh Head of Occupier Services - Transaction Management & Advisory tiffanygoh@ivpsmalaysia.com

Asia Pacific Dr Dominic Brown Head of Insight & Analysis, Asia Pacific dominic.brown@cushwake.com

Disclaimer. The information in this material is general in nature and has been created by Cushman & Wakefield for information purposes only. It is not intended to be a complete description of the markets or developments to which it refers. The material uses information obtained from a variety of sources which Cushman & Wakefield believe to be reliable however, it has not verified all or any information and does not represent, warrant or guarantee its accuracy, adequacy or completeness. Any forecasts or other forward looking statements contained in this material may involve significant elements of subjective judgment and assumptions as to future events which may or may not be correct and are beyond the control of Cushman & Wakefield. Cushman & Wakefield is not responsible for any loss suffered as a result of or in relation to the use of this material. To the extent permitted by law, Cushman & Wakefield excludes any liability, including any liability for negligence, for any loss, including indirect or consequential damages arising from or in relation to the use of this material. All expressions of opinion included in this material are subject to change. © 2022 Cushman & Wakefield. All rights reserved.