KL Ranked Asia-Pacific’s Most Affordable City for Office Occupancy — A Competitive Edge for Businesses and Property Investors

Kuala Lumpur has achieved a remarkable milestone in the Asia-Pacific commercial property landscape. According to a new 3Q 2025 regional office market report, Malaysia’s capital city is officially the most affordable location for office occupancy among 23 major Asia-Pacific markets — a position that strengthens its appeal as a leading destination for businesses, digital firms, and real estate investors.

While global cities like Hong Kong, Singapore, Tokyo and Sydney continue to dominate the premium office market with exceptionally high occupancy costs, Kuala Lumpur stands out with an average occupancy cost of just US$20.58 per sq ft (RM86). This places KL far below its regional competitors and more than seven times cheaper than Hong Kong, which remains Asia-Pacific’s most expensive market at US$146.51 per sq ft (RM615).

What Occupancy Cost Really Means — And Why KL Wins Big

In commercial real estate, occupancy cost captures the total expenditure a tenant must bear to lease and operate office space. It goes beyond basic rent and typically includes:

KL’s Occupancy Cost Advantage Amid Market Adjustments

The report highlights that conditions in KL remained subdued in 3Q25, due partly to adjustments associated with the Sales and Service Tax (SST). Companies were cautious and recalibrated their office strategies in response to inflationary pressures.

Even so, KL’s robust supply pipeline — with over 44,000 sq m of new space delivered during the quarter — kept rents stable and occupancy resilient.

This combination of moderating costs and steady performance strengthens KL’s appeal for:

Multinationals exploring regional shared service hubs
Start-ups seeking cost-efficient headquarters
Back-office and digital operations relocating from pricier cities
Corporations adopting hybrid workplace models

For property investors, this signals a balanced, sustainable office market capable of supporting long-term commercial growth.

Where KL Stands on Vacancy Rates

While KL leads in affordability, it ranked fifth highest in vacancy rate among the surveyed cities, coming in at 23.1% — trailing:

Shenzhen (26.1%)
Phnom Penh (23.9%)
Bangkok (23.5%)
Shanghai (23.3%)

High vacancy typically correlates with competitive rental pricing, but in KL’s case, it also reflects the rapid pace at which modern office towers are being delivered — especially in areas like Tun Razak Exchange (TRX), Bangsar South, and KL Eco City.

By contrast, markets with extremely tight vacancies include:

Tokyo – 1.7%
Seoul – 2.7%
Singapore – 5.3%

These figures highlight the room for future absorption in KL as businesses reposition themselves amid rising operating costs in high-density cities.

Asia-Pacific Office Trends: Momentum Slows, Market Divergence Grows

The broader Asia-Pacific region saw a notable slowdown in rental growth in 3Q25. Prime rents remained largely unchanged quarter-on-quarter, following a marginal 0.2% increase in 2Q25.

Key trends include:

1. Mainland China: Slowing Growth

Oversupply continues to weigh on Beijing, Shanghai, and Shenzhen, accelerating the decline in rental momentum.

2. Southeast Asia: Landlords Prioritise Occupancy

Most markets saw rental stagnation as landlords remained flexible:

Ho Chi Minh City rents fell 1.7%
Jakarta saw continued tenant-friendly conditions
Singapore remained stable with marginal rent growth

3. Regional Outliers: Bangkok & Manila

These were the only Southeast Asian cities with rising rents:

Bangkok benefitted from new premium stock
Manila saw rising demand from IT-BPM and global services industries

4. India & Australia: Positive Momentum

Despite large new deliveries, India recorded 1.7% QoQ rental growth, driven by strong corporate activity in Bengaluru, Delhi-NCR, and Mumbai.

Australia’s market also grew 1.2% on average, supported by professional services and prime-grade demand — with Brisbane leading annual growth and Melbourne topping quarterly gains.

What This Means for KL Property Investors

KL’s position as Asia-Pacific’s most affordable city for office occupancy has far-reaching implications for Malaysia’s property and investment landscape.

1. Business Relocation Potential

As operating costs soar in Singapore and Hong Kong, KL emerges as a cost-effective base for:

Regional headquarters
Global capability centres
Digital and AI-focused companies
Finance and fintech operations

2. Growing Appeal for Hybrid & Flexible Workspaces

KL’s affordability supports:

Co-working operators like WeWork and WORQ
Managed office solutions
Remote-first corporate setups

3. Strengthened Commercial Investment Prospects

Investors can expect attractive yields in:

TRX commercial towers
Bangsar South Grade A offices
KL city fringe areas with redevelopment potential

Long-term, this elevates KL’s profile as a regional commercial hub capable of competing with Asia-Pacific’s top-tier cities.

Conclusion: KL’s Affordability Creates a Strategic Edge

By ranking as the most affordable Asia-Pacific city for office occupancy, Kuala Lumpur reinforces its position as a rising star in regional business, digitalisation, and commercial real estate.

Amid global cost pressures, KL’s combination of affordability, infrastructure, talent availability, and strategic location creates a compelling case for both corporations and investors.

To explore how KL’s affordability and development momentum translate into strategic property opportunities, visit klproperty.cc — your trusted guide to Malaysia’s evolving real estate landscape.