New Office Supply Set to Intensify Vacancy Pressure in Kuala Lumpur and Selangor

Kuala Lumpur’s office market is expected to face renewed pressure as a significant wave of new space enters the market, according to a recent property outlook. Close to six million square feet of office space is currently under construction in the capital, adding to existing challenges in an already competitive environment.

Based on findings from Rahim & Co’s Property Market Review 2025/2026, the upcoming supply consists of eight office buildings, most of which are located within Kuala Lumpur’s city centre. Nationwide office occupancy softened to 77.8% by mid-2025 before edging up slightly to 78% in September, highlighting the fragile recovery in demand.

The consultancy emphasised the growing importance of asset enhancement, repositioning and repurposing strategies, particularly for older buildings that are struggling to attract tenants in today’s market.

Kuala Lumpur: High Supply, Uneven Demand

Kuala Lumpur continues to dominate Malaysia’s commercial property in KL, with total purpose-built office supply reaching 109.86 million sq ft in the first half of 2025. However, occupancy stood at just 72.2%, leaving approximately 30.5 million sq ft of vacant space, much of it concentrated in ageing office stock.

The rapid emergence of new office hubs such as Tun Razak Exchange (TRX), Merdeka 118, IOI City Towers and Pavilion Damansara Heights has intensified competition. As a result, many office buildings completed in the early 2000s are finding it increasingly difficult to compete due to outdated layouts, weaker ESG credentials and limited technological readiness.

Current demand for office space in Kuala Lumpur is largely focused on premium, ESG-compliant and transit-oriented developments, supported in part by foreign investors and multinational firms facilitated by agencies such as InvestKL and MIDA. This trend has also strengthened interest in selected growth corridors, including office space in Bukit Jalil, where connectivity and modern infrastructure are key draws.

Selangor Office Market: Stable but Still Challenged

In Selangor — Malaysia’s primary economic engine and home to key industrial and commercial clusters — total office supply reached 50.58 million sq ft as at the first half of 2025. Average occupancy stood at 72.5%, translating into around 13.9 million sq ft of vacant space.

Petaling Jaya remains the state’s largest office node, accounting for roughly 40% of Selangor’s office stock, with 20.2 million sq ft spread across 90 buildings. One new office project is currently under construction in the area, expected to add more than 350,000 sq ft upon completion.

While Selangor continues to benefit from strong fundamentals driven by industrial land in Selangor, industrial property in Subang area, and manufacturing hubs such as factory space in Puchong, the office sector still faces structural oversupply in non-prime locations.

Outlook: Quality Over Quantity

Looking ahead, market observers expect demand to remain selective. Occupiers are prioritising efficiency, sustainability and accessibility, while landlords of older assets may need to consider conversion, refurbishment or alternative uses to remain relevant.

As Kuala Lumpur and Selangor evolve, the divergence between modern, well-located office developments and obsolete stock is likely to widen — reinforcing the need for strategic planning across the broader commercial and industrial property landscape in the Klang Valley.