Leasing momentum strengthens with surge in relocation activities

• Leasing momentum strengthened with significant relocation activity driven by flight to quality. Absorption grew moderately to 488,000 sq ft, led by the finance, tech and business services sectors.
• Strong pre-leasing momentum has emerged, particularly among major tenants in the DC submarket. New developments in established submarkets trended smaller (under 600,000 sq ft) due to supply concentration, while the DC accommodated larger formats with available capacity.

Business relocation strategies depend on future supply

• With no completions in the quarter, vacancy rates improved across submarkets. Overall, the vacancy rate fell by 0.76 percentage points to 15.2%. However, supply in 2026, equivalent to 2.64 million sq ft, will likely push the vacancy rate to above 17%.
• Timely completion of future supply is critical to accommodate planned relocations. Delays would disrupt businesses’ long-term relocation strategies, forcing firms to seek alternatives or extend leases unfavourably.

Limited quality supply accelerates rental growth

• Rental increases have been prominent across submarkets. Overall, the average rental increased to MYR 6.86 psf from MYR 6.81 psf. This market-wide rental appreciation highlights the ongoing competition for well-located quality buildings.
• Major corporate tenants have allocated significant capital expenditure for relocations. Despite the competitive market, landlords have been balancing rental growth with strategic concessions to secure high-quality, long-term occupiers.

Outlook: Pre-leasing momentum signals confident repositioning

• New supply in 2026 is expected to be 2.64 million sq ft, potentially pushing vacancy to 17.3%. However, premium locations are becoming a landlord’s market as flight to quality intensifies, with Grade A buildings commanding growth while secondary supply faces pressures.
• Tenants with expiring leases are actively exploring pre-leasing opportunities. Many are specifically targeting buildings under construction to secure access to future-ready green spaces, aligned with sustainability requirements.