JLL Malaysia: Broad-Based Strengthening in KL’s Property Market in 2025

Kuala Lumpur’s real estate market is showing renewed momentum across multiple sectors, according to the Q2 2025 Market Research Report by JLL Malaysia. From Grade A office spaces attracting tech and finance firms, to industrial warehouses experiencing record demand, to steady absorption in retail and high-end residential segments, the findings paint a picture of broad recovery and cautious optimism.

Office Market: Tech and Finance Lead the Recovery

The Kuala Lumpur office market continued its upward trajectory with positive absorption across all submarkets.

Net absorption in KL City: 231,392 sq ft.
Vacancy rate drop: from 23.6% (Q2 2024) to 19.2% (Q2 2025).

“Financial and technology sectors are driving office demand in Kuala Lumpur, with businesses strategically upgrading to newer, higher-quality buildings that better support modern operations,” said Yulia Nikulicheva, Head of Research & Consultancy at JLL Malaysia.

The quarter also saw the completion of Lendlease Campus @ TRX, adding 200,000 sq ft of LEED Gold-certified workspace. With upcoming projects like The Capitol and UOA Duo Tower fast-tracked for 2026, KL’s office landscape is evolving rapidly.

Industrial & Logistics: Record Demand, Vacancy Compression

The industrial property sector remains Malaysia’s standout performer, with Grade A warehouses in Klang Valley, Johor, and Penang continuing to attract deep demand.

New supply added: 2.1 million sq ft in Q2 2025.
Vacancy rates: dropped from 3.9% (Q1 2025) to 2.0% (Q2 2025).
Capital values: up 3.9% year-on-year.

Key demand drivers:

Automotive supply chains.
Electrical & electronics industries.
Third-party logistics providers (3PLs).

Nikulicheva noted that industrial assets remain a defensive choice for institutional investors:

“The logistics and industrial market’s strength is reflected in stable rental rates and increasing capital values, reinforcing the sector’s position as a preferred defensive asset.”

With tariff uncertainty clouding the global trade outlook, some investors are adopting a wait-and-see approach. Yet demand from occupiers continues to outpace supply, ensuring strong fundamentals.

Data Centres: Growth with Strategic Consolidation

Malaysia’s data centre boom continues, but the market is entering a consolidation phase after years of rapid expansion.

Completed capacity: 638 MW.
Under construction: 1,300 MW.
Future pipeline: over 3,450 MW.

Rising construction costs, tighter regulations, and complex approval processes are leading developers to favour strategic partnerships over outright land purchases.

This shift reflects a maturing market, where quality, sustainability, and scalable operations matter more than raw expansion. With Kuala Lumpur and Johor at the forefront, Malaysia is cementing itself as a regional hub for data centres, supporting both property investors and digital economy players.

Retail: Stable Occupancy, Exciting New Openings

The Kuala Lumpur retail market showed steady progress:

Vacancy rate: improved from 16.71% (2024) to 15.71% (2025).
Tenant demand: strong, with F&B and fashion retailers leading expansions.

New entries include Benihana, Tous Les Jours, and Cabbeen, offsetting closures like Don Don Donki and Spotlight. Entertainment and co-working spaces are also helping malls diversify their tenant mix.

Upcoming retail highlights:

Ombak KLCC (KLCC precinct, within 12 months).
118 Mall (at the foot of Merdeka 118).
Hextar World at Empire City – set to be Greater KL’s largest retail addition with major anchor tenants confirmed.
KLGCC Mall (240,000 sq ft, Sime Darby Property’s third wholly-owned mall).
Sunway Square Mall (300,000 sq ft, with TGV, Village Grocer, BookXcess Library).

“Developers are adapting strategies — city centre projects target landmark malls, while suburban markets are focusing on neighbourhood malls as community hubs,” said Sr Jamie Tan, Managing Director of JLL Malaysia.

For KL property investors, malls near residential and transit hubs remain key draws for both shoppers and tenants.

Residential: Global Buyers Eye Kuala Lumpur

The Klang Valley residential market remained steady despite a mild dip in overall transaction activity.

High-end segment: transaction volumes rose 6.6%, values up 5.6%.
Overhang rates: now at 19–23%, significantly healthier compared to 63% during the pandemic.
Price growth:
- Serviced apartments: +1.8%.
- Condominiums: +2.3%.
- Double-storey terraces: +1.4%.

Recent completions include Isola KLCC, The Conlay, and Bangsar Hill Park, adding 1,443 luxury units to the prime residential stock.

Jamie Tan noted that lower borrowing costs (after a 25 basis point OPR cut) and developer incentives will sustain activity:

“Demand from high-income earners in Malaysia remains resilient, with international buyers from the Middle East, Asia Pacific, and Europe showing keen interest.”

A standout trend: Malaysia ranks 4th globally for Chinese luxury property investors, with Kuala Lumpur homes averaging USD 240 per sq ft — 87% cheaper than Singapore.

This affordability advantage is cementing KL as a luxury property hotspot for global investors, especially in KLCC, Mont Kiara, and Bangsar.

What This Means for KL Property Investors

JLL’s Q2 2025 report highlights opportunities across all sectors:

Office: Premium, sustainable towers in TRX, KLCC, and KL Sentral are attracting blue-chip tenants. Investors should monitor pre-leasing momentum in projects completing by 2026.
Industrial & Logistics: Warehouses and factories remain the safest bet, with strong rental growth and capital appreciation potential. Hotspots include Klang Valley, Johor, and Penang.
Data Centres: A high-growth niche with long-term stability. Strategic partnerships (developers, tech firms, utilities) will define the next wave of investment.
Retail: Landmark malls in the city centre and well-placed suburban malls are poised for success. Mixed-use developments with retail components will enjoy higher footfall.
Residential: KL continues to offer one of the world’s best value-for-money luxury property markets. International interest, low overhang, and steady price growth make KL property compelling for both end-users and investors.

Conclusion

JLL Malaysia’s Q2 2025 market report confirms that Kuala Lumpur is entering a broad-based property recovery. While each sector faces its own challenges — from global tariff uncertainties to rising construction costs — the fundamentals remain strong.

For property buyers and investors, the message is clear: Kuala Lumpur real estate is regaining momentum across the board. With office absorption improving, industrial and logistics assets at record demand, retail vacancy narrowing, and luxury residential attracting global capital, the city is positioning itself as one of Southeast Asia’s most attractive property markets.

For those seeking opportunities, now is the time to explore KL property — from transit-oriented condos to Grade A office towers and strategic industrial assets — before prices climb further as market confidence strengthens.