KUALA LUMPUR: The fringe area of Kuala Lumpur is expected to face an office space glut by 2017, said JLL Malaysia country head Y.Y. Lau.
She said office rents are projected to decline on the back of a weakened economy and supply concerns over the next few years.
The KL fringe area covers developments such as KL Eco City, Southpoint, the Vertical Corporate Tower in Bangsar South, Aurora Tower, KLCC Lot, Nucleus @ Mutiara, Uptown and Icon City.
According to JLL Research, there is nearly 940,000 sq ft at the completed Naza Tower and Ilham Tower at KL central business district (CBD), 810,000 sq ft at Damansara City and some 350,000 sq ft in Cyberjaya and Putrajaya collectively.
As at the second quarter of 2015, there are about 2.66 million sq ft of office space in the KL general area and in CyberJaya and Putrajaya, which is estimated to near double in 2016 and reach 10.97 million sq ft by 2017.
'There would be some uncertainty during that time as the oversupply in the KL CBD would be huge in 2019,' Lau said when releasing the Kuala Lumpur Office Outlook market update.
'But people will be more realistic over time,' JLL managing director for Singapore and South-East Asia Chris Fossick said, alluding to the fact that the property bull run in 2012 was not likely to repeat itself in the near future.
'The expected future supply will put downward pressure on office performance.'
Essentially, the second quarter of 2015 saw negative take-up in office spaces due to downsizing of some oil and gas companies, Lau said.
Meanwhile, demand for the period was spurred by owner occupation.
According to the report, there will be a forecast 4 million sq ft of net lettable space available in the KL fringe by 2017, largely due to tenants' decision for better quality buildings.
'We have seen some of that in insurance companies which have done mergers and acquisitions, and moved on to quality buildings,' Lau said.
Rents remained stable in the KL fringe, hovering at RM5.98 per sq ft in the second quarter of 2015, projected to hit RM6 in 2017.
'New expected completions would likely push up rents slightly,' Lau said.
She said large infrastructure projects being undertaken around KL were changing tenant requirements with preference to be near the light rail transit, highways and public transport as they created new hotspots and opportunities for developers and landlords.
'Meanwhile, larger floorplates are being incorporated to support the open plan '˜work smart concept' or '˜hot desking concept' and more collaborative work environment, catering to the Gen Y demand for new types of workspace,' Lau said.