Leasing activity remains steady as vacancy improves to 14.8%

• The market saw minimal movement in the quarter, with 250,000 sq ft of net absorption driven by automotive and fintech firms. The market is expected to strengthen in H2 2026 as pipeline deals conclude, potentially boosting demand further.
• With no new completions in the quarter, the overall vacancy rate improved to 14.8%, a decrease of 0.4% q-o-q, indicating positive leasing momentum in the absence of new competing supply.

Pipeline supply expected to support rental growth amid limited prime space

• The 2026–2030 pipeline is expected to stabilise and support rental growth due to limited availability of prime space, particularly green-certified buildings.
• The introduction of the Malaysian Digital Location Recognition (MLDR) framework provides a formal certification standard for tech-ready and ESG-aligned buildings, which would accelerate the bifurcation between premium and secondary supply.

Steady rental gains amid quiet investment activity

• The overall average rental increased to RM 6.88 psf/month in Q2 2026, from RM 6.86 psf/month, as rental increments were noted across submarkets, especially within established office locations such as TRX and Bangsar South.
• The KL transaction market remained subdued, dominated by domestic players. One notable deal was Golden Destinations Group Bhd’s subsidiary, ICE Holidays Sdn Bhd acquisition of Menara Liberty and the adjacent Menara Liberty Annex from Liberty General Insurance for RM 45 million to consolidate operations into its new headquarters.

Outlook: Premium office space to lead demand despite new completions

• Moving forward, the KL market is anticipated to deliver 2.64 million sq ft of new supply by year-end 2026, which is forecast to push vacancy to 16.4%.
• Nevertheless, premium locations with future-ready building specifications will retain strong performance as flight-to-quality intensifies, while aged buildings face increasing pressure.