KL’s Commercial Property Market: From Oversupply to Obsolescence Oversupply
Kuala Lumpur’s skyline may appear flush with “For Rent” signs, but the city’s commercial property challenge is not just about too much space—it’s about too much outdated space.
According to NAPIC, purpose-built office occupancy fell to 72.1% in 2023. By mid-2025, Cushman & Wakefield pegged vacancy rates at 27.49%, while Knight Frank reported 23.4% vacancy for prime offices.
And yet, newer developments are still attracting tenants. This split reveals a deeper structural issue: obsolescence oversupply, where ageing, poorly equipped buildings lose competitiveness to modern, ESG-compliant alternatives.
The Grade A Advantage
A JLL study found 70% of KL’s offices were built before 2015 and now lag behind in technology, design, and sustainability standards. Tenants are moving to Grade A, green-certified spaces, leaving older buildings struggling to adapt.
The performance gap is clear:
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KL Eco City / Bangsar South: Vacancy as low as 8.5%
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Older KL CBD: Vacancy at 19.4%
New supply from projects like Menara 1194, Oxley Tower @ KLCC, and Tun Razak Exchange (TRX) is set to increase competition further, raising the bar for landlords.
Hybrid Work and the Rise of Flex Space
The shift toward hybrid work is another driver. A 2024 Cisco study found 60% of Malaysian workers believe hybrid arrangements improve work quality.
Flexible workspace operators like Common Ground report over 85% occupancy, reflecting a demand for adaptable, amenity-rich environments.
Adaptive Reuse: Breathing New Life into Old Assets
Owners of ageing buildings are turning to adaptive reuse to stay relevant:
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Lee Rubber Building → Else Kuala Lumpur boutique hotel
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REXKL → Cultural and event space
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Kompleks Pejabat Damansara (Block A) → Boutique retail
Policymakers are being urged to offer tax incentives and urban renewal grants to encourage such transformations.
KL Retail: A Two-Tiered Performance
In retail, NAPIC reported shopping complex occupancy at 83.8% in 2023, rising to 86.8% by year-end. But performance is polarised:
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Thriving Malls: Suria KLCC, Pavilion KL, and The Exchange TRX, driven by prime locations, curated tenants, and experiential concepts.
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Underperforming Malls: Older centres struggling to meet evolving consumer expectations—an “outdated experience oversupply.”
The Exchange TRX’s 10-acre rooftop park is a prime example of how lifestyle integration boosts retail relevance.
Tourism and Micro-Retail Boost
International tourism, aided by visa exemptions for Chinese visitors, is set to push retail rents up to 10% in 2025.
On a smaller scale, DBKL’s hawker centre upgrades—offering units from as low as RM40–RM162 per month—are fostering micro-retail and enhancing urban inclusivity.
Long-Term Outlook: Positive but Selective
KL’s commercial market is not in crisis—it’s in transition. Growth is concentrated in:
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Premium, green-certified offices
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Flexible workspaces
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Experiential retail destinations
GDP growth projections of 4.4%–5.5% and infrastructure catalysts like ECRL and Bandar Malaysia provide long-term support.
However, risks remain:
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Persistent vacancy in obsolete buildings
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Rising operational costs
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Global economic uncertainty
Strategies for Landlords and Investors
To stay competitive, asset owners are increasingly adopting:
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Asset Enhancement Initiatives (AEIs)
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Green certifications to meet ESG requirements
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Mixed-use repositioning to add lifestyle and community value
Bottom Line: Kuala Lumpur’s commercial property market is undergoing a structural reset. Investors and owners who embrace innovation, sustainability, and adaptive reuse will be best positioned to capture the next wave of growth.
Discover investment-grade opportunities in KL’s premium office and retail sectors at klproperty.cc—your source for market insights and curated property leads.
