Office Market

The absence of new supply provided a temporary pause following several years of active deliveries, allowing recently completed developments to continue leasing up amid an increasingly selective occupier environment.

Completion activity is expected to accelerate in 2H2026, with Menara Golden Eagle in KL City, KL Midtown Signature Office Towers and Duo Tower in the KL Fringe, and The Capitol in Selangor — collectively contributing approximately 2.7 million sq ft of new office space. Recent developments reflect a gradual shift towards higher sustainability, wellness and digital readiness standards in new office supply; Merdeka 118 recently attained MD Nexus status and WELL Core Platinum certification.

Demand remained primarily driven by footprint optimisation and relocation activity, as occupiers recalibrate space requirements in response to hybrid work arrangements, cost considerations and operational efficiency targets. Average rents recorded stable to modest gains across submarkets in 1H2026: KL City stood at RM 6.82 per sq ft per month, KL Fringe at RM 5.90 and Selangor at RM 4.34. Performance dispersion grows increasingly pronounced, with prime and well-connected assets maintaining stronger pricing resilience while older buildings face continued leasing pressure.

Notable deals included Menara AmBank (RM 331 million), Menara Liberty (RM 45 million) and Wisma HELP (RM 60 million). IOI Properties has also proposed injecting Puchong Financial Corporate Centre and IOI City Towers into its proposed REIT listing, reflecting continued interest in monetising stabilised income-producing assets.

In the absence of significant new supply in the near term, the market is expected to remain in an absorption-driven phase.

The average occupancy rate trended upward to 54.6% in 1H2026, underpinned by continued tenant demand for premium Grade A office spaces. Average Grade A occupancy recorded an increase of 4.9 ppt from 2H2025, significantly outpacing Grade B office spaces which registered marginal growth of 0.2 ppt.

Grade A offices command RM 4.00 to RM 6.00 per sq ft, but the overall average held steady at RM 3.10 to RM 3.80 per sq ft due to the high proportion of Grade B inventory. Iskandar Puteri was the exception, with rents edging up to RM 3.60–3.80 on tightening Grade A availability.

Active leasing interest within Grade A office space was highlighted by significant space absorption at MVS North & South Tower (each over 30,000 sq ft) and Menara IIB (over 60,000 sq ft). Grant Thornton established its presence at MVS North Tower and PwC secured premier space within MVS South Tower.

Grade A office space is also experiencing a growing influx of appointment-based, high-end retailers such as aesthetic clinics and bridal galleries. Klang Valley-based Co-labs marked its maiden expansion into the southern region by launching a 14,000-sq ft outlet at MVS South Tower, while INFINITY 8 further expanded its high-end 'Reserved' portfolio at Menara IIB.

During 1H2026, Penang's office market recorded a further modest increase in supply following the completion of The Light Exchange in Gelugor, which added approximately 176,000 sq ft of NLA. As a result, total stock of privately-owned office space rose to approximately 8.2 million sq ft, comprising 6.7 million sq ft on Penang Island and 1.5 million sq ft in Seberang Perai.

Looking ahead, GBS@Technoplex is expected to introduce approximately 450,000 sq ft of office space upon its completion in 2028, reinforcing Penang's position as a leading global business and technology hub in the northern region.

The average occupancy rate in Seberang Perai increased marginally from 58.9% to 59.1% over the same period. George Town and Seberang Jaya registered stronger gains of 1.8% and 1.1% respectively. Premium-grade buildings outside George Town — including Menara IJM in Jelutong, Suntech@Penang Cybercity, GBS@Mahsuri and GBS@Mayang — recorded occupancy between 90% and full occupancy.

Newly completed office developments recorded encouraging committed occupancy levels: The Light Exchange reported to be approximately 90% committed while GBS@Penang Airport achieved around 80% committed occupancy, reflecting continued demand from GBS, technology-related and corporate occupiers.

The Light Exchange in Gelugor achieved higher asking rentals, underpinned by demand for modern, high-quality office space and its proximity to a future Mutiara LRT station.

The overall occupancy rate registered a marginal increase to 83.9% in comparison to 83.3% in 4Q2025.

In 1H2026, asking gross rentals for office spaces within the KK CBD and its Southern Fringe remained unchanged from RM 2.30 to RM 5.50 per sq ft per month. For Karamunsing locality, asking gross rentals also maintained from the previous half at RM 2.00 to RM 2.30 per sq ft per month.

This has accelerated space demand among energy entities and supporting supply chain vendors. There is also increasing demand for plug-and-play office spaces to accommodate project-based needs.

As the state's primary commercial and administrative centre, Kuching accounted for the largest share of new completions, further reinforcing its dominance within Sarawak's office market. Miri remained the only district with incoming office supply.

Kuching continued to outperform at 90.2%, as the state's principal administrative and commercial centre, while Samarahan maintained the highest occupancy levels at 97.5%, supported by its relatively limited office stock and absence of any significant new supply. Miri experienced a modest moderation in occupancy amid ongoing supply expansion.

The proposed Batang Baram Delta development represents a significant long-term economic initiative aimed at attracting investment and expanding industrial and maritime-related activities in Miri. Ongoing infrastructure investments under the 12MP continue to improve accessibility and connectivity throughout the state.