International brands and experiential concepts continue to drive leasing momentum

• Malaysia ranked 2nd in the IPSOS Consumer Confidence Index (56.7 in May 2026), showing positive consumer sentiment. Tourism surpassed pre-pandemic levels with 10.6 million arrivals in 1Q26, with Chinese visitors recording strongest growth, supporting city centre demand.
• Leasing demand remained active with first-to-market openings including Marithé+François Girbaud at Suria KLCC, ACTIVATE’s first Asian outlet at Pavilion Bukit Jalil, and ANKER’s debut Southeast Asia store at IOI City Mall.

No new supply added in Q2 2026

• No new completions were recorded in Q2 2026, with total stock remaining at 11.54 million sq ft in City Centre and 39.63 million sq ft in Suburban submarkets.
• Vacancy rates declined across both submarkets, with City Centre falling to 9.2% and Suburban to 18.2%. City Centre benefitted from near-full occupancy at prime malls where landlords improved tenant mix, while Suburban reflected demand at major regional malls.

Rental rates edge higher across both submarkets; one notable investment transaction concluded

• Rental rates increased modestly across both submarkets, driven by tenant demand for high-visibility space at prime locations. City Centre growth reflected sustained tourism recovery and limited new supply, while Suburban growth was led by prime regional mall spaces.
• One notable investment transaction recorded: KIP REIT acquired Setapak Central Mall for RM435 million. The 514,777 sq ft mall had 99.89% occupancy as of February 2026. Investment activity remained locally supported, with investors focusing on strategic, quality assets.

Outlook: Sustained tenant demand expected to absorb incoming City Centre supply and support market stability

• Supply pressure is expected to intensify toward year-end City Centre completions, though net absorption should remain positive. Demand from international and local retailers across segments is anticipated to sustain leasing momentum, particularly for prime space.
• Visit Malaysia’s extension through 2027 is expected to support City Centre demand. The upcoming general election may reshape the policy landscape. Investment appetite is likely to remain centred around domestic capital focusing on quality assets.