Could Kuala Lumpur Office Glut Worsen?

 

The office market in the capital city could face further pressure with the incoming supply of nearly six million square feet of new space, a property report warned. The under-construction space comprises eight buildings, the majority of which are in the city centre, according to Rahim & Co’s Property Market Review 2025/2026. Nationwide office occupancy rates fell to 77.8% at June-end before slightly improving to 78% by September, the report said. 

The real estate consulting firm reiterated the need for repurposing or asset enhancement strategies to reduce vacancy. Kuala Lumpur continues to hold the largest concentration of purpose-built office space in the country, with total supply reaching 109.86 million sq ft in the first half of 2025. Occupancy stood at 72.2%, leaving around 30.51 million sq ft of vacant space, largely in older buildings.

 

 The rise of new office hubs, including the Tun Razak Exchange, Merdeka 118, IOI City Towers and Pavilion Damansara Heights, has left ageing and underperforming buildings struggling to compete. 

Many offices built in the early 2000s no longer meet current standards for design, environmental performance, or technological readiness, contributing to a surplus of obsolete space. Demand for office space in Kuala Lumpur is concentrated in premium, ESG-certified, transit-accessible locations, supported in part by international interest driven by agencies such as InvestKL and Mida, Rahim & Co said.

In neighbouring Selangor, the country’s economic powerhouse, the office sector had a total supply of 50.58 million sq ft as of the first half of 2025 with an average occupancy rate of 72.5%, leaving about 13.9 million sq ft of vacant space. Petaling Jaya accounted for the largest concentration, with 20.2 million sq ft across 90 office buildings, representing 40% of the state’s stock. One new office building is currently under construction, which will add more than 350,000 sq ft of space once it is completed. 

One cannot blame banks for this situation; it is the government that approves these developments. It must be more rigorous on approvals and projections made. Private developers will always suggest it is feasible and justify construction of “unwanted” green buildings when old ones remain largely vacant. 

How do we solve this problem? Maybe the new Minister (of Federal Territories) could enforce structure plans and review the approval process? 

Reference:

Kuala Lumpur office glut could worsen, property report warns, Choy Nyen Yiau & Eng Wen Tzer, theedgemalaysia.com, 9 January 2026