Kuala Lumpur Office Market 2Q2026: Occupancy and Rents Rise as Leasing Strengthens

Kuala Lumpur’s office market recorded stronger leasing activity in the second quarter of 2026, with net absorption exceeding one million sq ft and average occupancy across KL City improving to 73.9%, according to the latest Knight Frank Kuala Lumpur and Selangor Office Monitor.

The findings, published by The Edge Malaysia on 6 November 2026, show average KL City office rents increasing from RM6.80 to RM6.85 per sq ft per month, supported by corporate relocations and demand for newer Grade A buildings.

Across KL City, KL Fringe and Selangor, total office stock remained at approximately 120.62 million sq ft, with no new completions recorded during the quarter.

However, the recovery remains uneven. While newer commercial districts continued attracting occupiers, Kuala Lumpur’s older central business district recorded an occupancy rate of just 57.2%.

The distinction highlights a market increasingly influenced by building quality, location and changing corporate accommodation requirements.

Kuala Lumpur Office Absorption Exceeds One Million Sq Ft

Knight Frank Malaysia reported slightly more than one million sq ft of net office absorption in Kuala Lumpur during 2Q2026, compared with approximately 235,000 sq ft in the preceding quarter.

A major contributor was Malayan Banking Bhd’s relocation to Menara Merdeka Maybank at the Merdeka 118 precinct.

Maybank occupies approximately 650,000 sq ft across 33 floors, consolidating around 7,000 employees within the building.

Other notable corporate activity included Bank of America’s new office at Menara Merdeka Maybank and Huawei’s 13,638 sq ft Asia-Pacific AI Lab at The Exchange 106 in Tun Razak Exchange.

These movements demonstrate continued demand for modern corporate space in established and emerging business districts.

Nevertheless, relocation-driven absorption should not be confused with an equivalent expansion of overall corporate employment or long-term occupied space. Companies moving from older buildings may create vacancies elsewhere.

The more important indicator will be whether the market can sustain absorption as additional office projects are completed.

New CBD Occupancy Reaches 78.8% While Older Offices Lag

Kuala Lumpur’s new central business district recorded average office occupancy of 78.8% in 2Q2026, up from 78.2% in the previous quarter.

The old CBD also improved, from 54.1% to 57.2%, but continues to face substantially higher vacancy levels.

Meanwhile, occupancy in the KL city centre peripheral area increased sharply from 51.2% to 64.9%.

Overall, KL City occupancy reached 73.9%, compared with 71% in 1Q2026.

These differences reinforce the importance of analysing individual office submarkets rather than treating Kuala Lumpur as a single rental market.

The growing preference for efficient floor plates, environmental certifications, modern building systems and accessibility is changing how corporations evaluate office locations.

Older towers can remain commercially relevant, but may require refurbishment, competitive rental structures or repositioning to attract new occupants.

Recent developments involving Menara Tun Perak and Menara Haw Par also illustrate how established commercial assets are being reassessed as the city’s office landscape evolves.

KL Office Rents Rise to RM6.85 Per Sq Ft

Improving occupancy contributed to modest rental increases across Kuala Lumpur.

In the new CBD, average monthly office rents rose from RM7.45 to RM7.51 per sq ft during the quarter.

The old CBD recorded a marginal increase from RM4.47 to RM4.48 per sq ft, while the city centre peripheral area reached RM5.74 per sq ft.

Across KL City, average rents increased to RM6.85 per sq ft.

The rental gap between the new and old CBD remains considerable, reflecting differences in building specifications, tenant preferences and market positioning.

For corporate occupiers, however, headline rental rates represent only part of the overall cost.

Fit-out expenditure, service charges, parking, energy efficiency and employee commuting arrangements can materially influence the total cost of occupying a building.

For landlords, stronger asking rents do not necessarily translate into proportional increases in net operating income, particularly where incentives or capital expenditure are required to secure tenants.

Bangsar South and KL Fringe Remain Highly Occupied

KL Fringe recorded an average occupancy rate of 88.7% in 2Q2026, compared with 88.6% in the preceding quarter.

Bangsar South/Kerinchi remained one of the strongest-performing office locations, with occupancy at 96%, although this represented a decline from 97.3%.

KL Sentral recorded 95.2% occupancy, while Mid Valley City/KL Eco City improved to 90.1%.

In contrast, the Taman Tun Dr Ismail/Mont Kiara/Dutamas office market experienced a marginal decline to 78.7%.

Rental performance also varied.

Mid Valley City/KL Eco City recorded a notable increase in average rents from RM6.64 to RM6.83 per sq ft, while Bangsar South/Kerinchi remained unchanged at RM5.70.

These results indicate that established employment centres continue attracting occupiers, although high occupancy does not mean every building or new development will experience equally strong leasing demand.

Selangor Office Occupancy Improves to 74.5%

Beyond Kuala Lumpur, Selangor’s office market recorded approximately 240,000 sq ft of net absorption during 2Q2026.

Leasing activity at Sunway Square Corporate Towers contributed to the improvement.

Overall occupancy increased from 73.2% to 74.5%, while average monthly rents rose slightly from RM4.33 to RM4.36 per sq ft.

Subang Jaya recorded a particularly notable occupancy improvement, from 63.9% to 69.2%.

Petaling Jaya also strengthened to 77.1%, while Cyberjaya improved marginally to 69.5%.

However, Shah Alam occupancy declined from 86.6% to 85.9%.

The mixed performance indicates that Selangor’s office demand remains sensitive to local tenant activity, building specifications and competition from established commercial centres.

Another 3.17 Million Sq Ft of Office Space Expected

Knight Frank identified approximately 3.17 million sq ft of office space under construction and scheduled for completion between the second half of 2026 and 2027.

KL Fringe accounts for approximately 1.58 million sq ft, followed by Selangor with 1.2 million sq ft and KL City with 390,000 sq ft.

The pipeline represents approximately 2.6% of existing Klang Valley office stock.

Although relatively manageable at a regional level, new completions may create significant competition within individual locations.

Buildings offering strong transport connectivity, efficient layouts, sustainability features and supporting amenities are likely to be better positioned to attract occupiers.

For landlords and investors, the critical consideration is whether future tenant demand can absorb new supply without increasing vacancies or requiring substantial rental incentives.

Kuala Lumpur’s Office Recovery Remains Selective

Knight Frank’s second-quarter findings provide evidence of improving leasing momentum across the Klang Valley, particularly in newer commercial developments and established employment districts.

However, the continued disparity between new CBD and old CBD occupancy shows that the market has not experienced a uniform recovery.

Corporate relocations, flexible workspace expansion and demand for better-quality offices are reshaping leasing patterns, while older buildings face increasing pressure to remain competitive.

For Kuala Lumpur’s commercial property market, the next test will be sustaining net absorption as new office supply enters the market through 2027.

The strongest opportunities are likely to depend on actual tenant demand, operating efficiency and long-term building competitiveness rather than a general expectation that all office rents and occupancy rates will continue rising.